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 ?
The FTSE/Xinhua China 25 Index closed higher, extending its rising streak from the past three trading days, led by China Telecom Corp Ltd (HK 0728; ADR CHA) after reports that some of its non-listed assets will seek backdoor listings, dealers contacted by Xinhua Financial Network said.
The NASD by-laws at issue were designed to regulate backdoor listings of non-Nasdaq companies," said Mr.
We were pricing an IPO but in the end we performed a backdoor listing," says Ms Mei, who adds that a similar business culture in the US and Australia is a bonus.