Category: Other financial sites. Country: United States (USA).
King & Associates, P.C. is a consulting firm dedicated to helping businesses with public and private transactions. We have numerous public shells available for sale and reverse mergers. Usually this includes our valuation services to determine the initial price of the shares, as well. In a reverse merger the private company shareholders receive a substantial majority of the shares of the public company and control of its board of directors. The transaction can be accomplished within weeks, resulting in the private company becoming a public company. If the shell is a reporting SEC registered company, the private company does not go through an expensive and time consuming review process with state and federal regulators because the public company has already completed the process. The transaction involves the private and public company exchanging information on each other, negotiating the merger terms, and signing a share exchange agreement. At the closing the shell company issues a substantial majority of its shares and board control to the shareholders of the private company, who pay for the public shell, and contribute their private company shares to the public shell company they now control. This share exchange and change of control completes the reverse merger and the private company is now public. THE IPO APPROACH. The other, and more common method of going public, is through an Initial Public Offering (IPO). The process involves attracting and retaining an underwriter, along with securities lawyers and auditors. A registration statement prepared and filed with federal and state regulators after which the company goes through an extensive review process which can take up to a year. Following the review process, the company goes on a road show and is presented to brokers and investors. The underwriter seeks subscriptions to purchase the company’s shares. If the subscriptions are sufficient, the underwriting becomes "firm". The IPO is then closed, the company is public, and the company receives its portion of the offering proceeds. The reason the IPO approach is the more common method of going public is because, generally, your attorneys and certified public accountants want to make as much money from you as possible. Because it takes ten to twenty times longer to compete an IPO, you will have to pay, at least, two, to four, times as much for it in legal and accounting fees. In addition, you have to deal with the frustrations of seemingly endless waiting on the SEC who you have no control over to speed the process faster, if necessary. In addition, often in an IPO, underwriters often work in collusion with their associates, the institutional investors and stock brokers to pre-sale an offering (The current focus of many SEC investigations). The result can be a sharp, and artificial, increase in the share of the price at the launch of the IPO. This rapid increase is, generally, followed by a rapid decline once the sell-off and profit-taking begin. This profit taking can result in a crippling devaluation of the new issue which can place undue stress on a company during a period which should be a positive growth period. Reverse mergers are not at risk to illegal pre-selling because you are working with your market makers and valuation experts and can establish a practical and supportable value for your stock prior to any major fund raising event - a value that is not artificially created by heavy up-front demand and short supply. Finally, a conventional IPO is risky for companies to undertake because the deal depends on market conditions over which you have no control. If the market is off, the underwriter may pull the offering. But, with a reverse merger, the deal rests solely on the people who control the public shell and the desire of its owners to be acquired by the private company. Market fluctuations and conditions rarely have anything to do with the success of the merger...
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