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Reverse Merger With A Public Shell Alternative

May 29, 2008
"Going Public" is the procedure of selling and promoting shares once held by a closely held private company to the general investing public for the first time ever; many times it has been referred as an IPO (Initial Public Offering).

Many skilled small business owners have the grand dream of taking their private business public. The economic incentives and rewards of becoming a public corporation include opportunities seldom offered to private businesses. Of course, the prestige and glamour are indicators of success when a private business goes public.

Nonetheless, the many going public vehicles and, the new financial duties of a public company, can make it a challenging endeavor. The going public process is a involved method involving many skills and business acumen; it can also be mystifying and bewildering, even for trained professionals.

When private businesses contemplate going public, the foremost reason is to build capitalization.

A crucial viewpoint of the varied means closely held private companies can go public, and what securities laws are relevant, is in order. The need to assess options with a sober mind is a must.

These are some of the bonuses of going public:

* The choices of capital formation will multiply, since your company will be able to attract many public investors.

* Investors - as well as company insiders - can take advantage of an exit strategy to sell their shares and recoup their initial investment.

* Raising capital is easier, and if investment attention regarding your business grows, it could provide a secondary trading market for your stock issue.

* By giving stock options your business can attract and retain key management.

In the past many businesses took advantage of a going public method called a "reverse merger with a public shell" as a way to go public.

In the above example, the publicly traded company is called a "shell," since all that's left of the originating business is the organizational constitution.

A reverse merger involves these circumstances:

In a public shell reverse merger - also known as a reverse take over - the shareholders of a privately held company buy control of the corporate shell company, merging it with the private company.

The shareholders of the private business get the biggest portion of the stock of the public shell company, thereby controlling its board of directors.

Of course, the risks involved with a reverse merger are numerous, and perhaps a review of the harmful aspects of a public shell reverse merger is needed.

The following are many of the unseen pitfalls of a reverse merger:

Most established businesses have a background, a history, and shareholders. The background and history can be not-so-desirable, and can take many forms: sloppy paperwork and record keeping, lawsuits, and many other surprises. Besides, public shells may have their share of angry or less-than-trusting investors very willing to "dump" at the first opportunity, depreciating the market for the company's stock.

The best going public advice is a requirement before entertaining a reverse merger, since many CEO's are lacking in experience and unaware of the perils of going public via a public shell reverse merger.

Thoroughness and seasoned guidance can help your enterprise to conquer all the pitfalls and take your company public in as little as 4 months.

Here are some more benefits of going public using an S-1 registration statement:

* No reporting requirements
* No mandatory minimum revenue
* No Sarbanes-Oxley
* No asset requirements

In closing, there are many ways to take a company public. Some methods of achieving this, such as reverse mergers with a public shell, can be more expensive and time-consuming than you may have originally thought. This is the reason you must consider alternatives, and do your due diligence before going through the process.
About the Author
Going public using a reverse merger with a public shell can be a costly process. To find out more information on going public the easy way, please contact Tiber Creek Corporation at http://www.tcc5.com/
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