Reverse merger

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Reverse Merger

An act where a private company purchases a publicly traded company and shifts its management into the latter. It also normally involves renaming the publicly traded company. This allows private companies to become publicly traded while avoiding the regulatory and financial requirements associated with an IPO. In order for a reverse merger 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 merger only provides the private company with more liquidity if there is a real market interest in it.

Reverse merger.

In a reverse merger, a privately held company purchases a publicly held company and, as part of the new entity, becomes public without an initial public offering (IPO).

It's described as reverse because in the more typical merger pattern a public company purchases a private company to expand its business.

References in periodicals archive ?
Such companies have no operations, making them attractive targets for those seeking reverse mergers for use in pump-and-dump schemes.
(Nasdaq: COOL) in a reverse merger. By joining their technological innovation, a groundbreaking process to regenerate fully-functioning new tissue (including skin, bone, muscle, cartilage, and blood vessels) with Majesco, a dormant public company, Lough and Swanson retain greater ownership in PolarityTE, their new company, then they would have in a traditional arrangement.
According to PCAOB Research Note 2011-PI, there were 159 CRMs with U.S.-listed public shells during a 39-month period ("Activity Summary and Audit Implications for Reverse Mergers Involving Companies from the China Region: January 1, 2007 through March 1, 2010").
There is nothing illegal or fraudulent about the reverse merger process itself.
The Public Company Accounting Oversight Board (PCAOB) has raised concerns about the auditing of Chinese companies accessing the US market through reverse merger transactions.
This guide walks bankers, lawyers, accountants, and officers of private companies through the process of reverse mergers and other options for going public without an initial public offering (IPO).
Although reverse mergers and SPACs both acquire third companies, the mechanics of the mergers are different.
(ZHT804) REVERSE MERGERS MARTIN SUMICHRAST THE SUMICHRAST REPORT.
Here are some high-profile and successful reverse mergers:
CAPITAL duties should not be levied on reverse mergers within the European Union (EU) if those deals only receive regular taxation at a marginal rate of up to 0.5%, the European Court of Justice (ECJ) has ruled.
In addition to focusing on the process of the reverse merger and the financial returns to various investor groups, this case examines how recent SEC actions may affect future reverse mergers.