Reverse Mergers and Alternative Public Offerings

For over 20 years, members of the Firm have participated in alternative means of going public, including SPACs and PIPE Offerings, Resale S-1 Registration Statements and Reverse Mergers.

A Reverse Merger is a transaction where whereby a private company becomes a public company by merging with a public shell company. A shell company is a company that has substantially no assets, except its corporate structure. A company can become a shell company by agreeing to spin off its current assets and liabilities at the time of the merger. Upon the merger, the private company shareholders receive a substantial majority of the shares of the public company (normally 90% to 95% or perhaps more) and the control of the board of directors, resulting in the private company becoming an operating public company. Prior to the merger, the transaction does not go through a review process with state and federal regulators. The transaction involves the private and shell company exchanging information on each other, negotiating the merger terms, and signing a share exchange agreement. At the closing, the public shell company issues a substantial majority of its shares and transfers the board control to the shareholders of the private company.

In these transactions, private businesses merge with operationally inactive public entities, enabling the private business to become publicly-traded on its own, without the need to either identify an underwriter or go through the formal process of an IPO.