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 ?
Although the changes are focused on initial public offerings and backdoor listings, at least 212 ASX-listed junior miners would currently fail the revised "assets test" criteria, according to the report.
The exchange is keeping its target of 10 IPOs and backdoor listings for 2015, even after just one company announced plans for an IPO so far this year.
Many of the firms currently listed on Korea's stock exchanges went public through reverse acquisitions and backdoor listings in 2005 and 2006, when an Asia-wide burst of interest in Korean pop culture infected investors.
No less than 19 listed firms own one or more film-related companies that went public through backdoor listings.
The general misconception is that finding a company for a backdoor listing is as simple as-forgive my crude analogy-paying a bar fine at your favorite Roxas Boulevard nightclub.
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.