Back Door Listing

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Back Door Listing

Informal for reverse acquisition. An act in which a private company purchases a publicly-traded company and shifts its management into the latter. This allows private companies to become publicly traded while avoiding the regulatory and financial requirements associated with an IPO. In order for a reverse acquisition to happen smoothly, the publicly-traded company is usually a shell corporation, that is, one with only an organizational structure and little or no activity. The two businesses can then merge the private company's product(s) with the public company's structure. It also makes initial trading less dependent on market conditions, a key risk in IPOs. However, it is important to note that a reverse acquisition only provides the private company with more liquidity if there is a real market interest in it.
References in periodicals archive ?
achieved a back-door listing on the main board of Shenzhen Stock Exchange through China Resources JinHua Co.
Together with these companies, ICBC offers services for corporate clients in capital operation activities such as Pre-IPO, public offering, back-door listing, asset injection, mezzanine finance, private placement and cross-border M&A.
But, by doing so the TSE risks being caught in a back-door listing that circumvented its own rules that require companies to show improved profitability before any IPO is sanctioned.
When Zhengzhou Baiwen, a struggling retailer, defaulted on loans late last year its share price shot up before it was sold to another firm who wanted a back-door listing.
4 Listing in China's stock exchange through back-door listing or IPOs