The private company merges into a public company and obtains the majority of its stock. The private company normally will change the name of the public corporation (often to its own name) and will appoint and elect its management and Board of Directors. The new public corporation has a base of shareholders sufficient to meet the shareholder requirement for admission to quotation on the NASDAQ Capital Market.
Going public through a reverse takeover allows a private company to go public typically at a lesser cost and with less stock dilution than through an initial public offering ("IPO"). While the process of going public and raising capital is combined in an IPO, in a reverse takeover (also know as a "blind pool" merger) these two functions are unbundled; a company can go public without raising additional capital. Through this unbundling operation, the process of going public is simplified greatly.
The private company that has gone public obtains the benefits of public trading of its securities, namely:
The benefits of going public through a reverse takeover as opposed to an IPO, are the following:
Requirements prior to entering into a reverse takeover are the following:
Once a company is taken public through a reverse takeover the financial markets hold the following future prospects in the capital markets for the newly public corporation: