Sure you have heard about "reverse take-overs". But do you know what it is in practice and why it is a fastlane way of doing business? Guess you don't. Many don't.
This is the deal:
You have a publicly traded shell company.
You have a privately held corporation.
What these two have in common is: Marriage.
The publicly, SEC registered company is public, but has nothing to build a value on. It is almost dead in terms of commerce.
The privately held company may or may not have any commerce. But it does have a dream. This dream can be whatever.
The point being: This privately held company wants to be publicly traded and it does not want to go through an IPO process that takes forever to do and cost lots of cash. And the risk is to high.
A back-door to the market is the reverse take-over.
Say we have Flowers Ltd selling artifical flowers to big companies. They have purchase agreements valued at $10 Million. They have a dream and need a way of having their stock being traded so that they can use their stock as money.
They find the publicly traded company Gustaf Holdings INC. They propose a marriage. The shell company gets live action. The private company gets a way of having their shares as money in transactions with suppliers or whatever. They clinch a deal.
Now, in order to merge these companies you have to emitt new shares at the same par value as the publicly traded shares. You need to synch it.
When you have done the emitting of shares and shares are in synch you let the private company pay for the newly emitted shares with their company value ($10 Million).
If the shell company was valued at $1 Million before and you bring in $10 Million, the new company is worth $11 Million. The private company now have $10 Million / $11 Million = 90.9% of the shares in the merged company.
And voÃla, you are public.
Time to do this? A few weeks. Some deals has been made in 30 days even.
This is the deal:
You have a publicly traded shell company.
You have a privately held corporation.
What these two have in common is: Marriage.
The publicly, SEC registered company is public, but has nothing to build a value on. It is almost dead in terms of commerce.
The privately held company may or may not have any commerce. But it does have a dream. This dream can be whatever.
The point being: This privately held company wants to be publicly traded and it does not want to go through an IPO process that takes forever to do and cost lots of cash. And the risk is to high.
A back-door to the market is the reverse take-over.
Say we have Flowers Ltd selling artifical flowers to big companies. They have purchase agreements valued at $10 Million. They have a dream and need a way of having their stock being traded so that they can use their stock as money.
They find the publicly traded company Gustaf Holdings INC. They propose a marriage. The shell company gets live action. The private company gets a way of having their shares as money in transactions with suppliers or whatever. They clinch a deal.
Now, in order to merge these companies you have to emitt new shares at the same par value as the publicly traded shares. You need to synch it.
When you have done the emitting of shares and shares are in synch you let the private company pay for the newly emitted shares with their company value ($10 Million).
If the shell company was valued at $1 Million before and you bring in $10 Million, the new company is worth $11 Million. The private company now have $10 Million / $11 Million = 90.9% of the shares in the merged company.
And voÃla, you are public.
Time to do this? A few weeks. Some deals has been made in 30 days even.
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