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Reverse Mergers (Shell)
A merger into a shell or blind pool as a means of taking a company public is totally different than a underwriting. It involves merging the private company into a public "shell", or a "blind pool", a company that is presently public but has no sales, and usually no assets or liabilities, but does have shareholders. The "shell" or "blind pool" company may or may not be a reporting company. It may have as few 20 shareholders and as many as several thousand.
A "shell" company may be one that went public years ago and then later went of the business that they were in, however remained a public company and keeping their reporting status.
When a merger takes place between the shell company or blind pool and a private company, the principal shareholders of the private company will control the reorganized public company. This type of merger can be a very effective and fast means for some companies to achieve a "public" status. This is especially effective for a company that may not quite be big enough or have the track record of sales and earnings or simply not have the "glamour" for a full public offering. It is also a method of becoming public usually much faster and with far less front-end cost. However, there are drawbacks to this type of merger and all of pros and cons must be carefully explored and some will be discussed herein.
How It Works
1. A shell has a certain number of shareholders, however usually no assets or liabilities. The shell acquires 100 percent of the outstanding stock of the private company in consideration for issuance to the private shareholders of a negotiated number of restricted shares in the public company. The private company generally continues to operate as a wholly owned subsidiary of the public company for a short period of time.
2. Following the merger as described above, the total shares held by the private company's shareholders will equal a majority percentage of the total outstanding stock in the public company. In effect, the private company usually acquires up to 95% of the total outstanding stock of the public company, leaving the public shareholders holding 5% of the outstanding stock.
3. One advantage of the merger into a shell is the short amount of time that it takes to effect the merger and become a public company. The time required for the entire process can usually be from three to eight weeks.
4. A shell is usually purchased for a negotiated amount of money, from $85,000 to $400,000 depending on the type of shell.
Going public through a merger with a shell or blind pool has both advantages and disadvantages. Many of the advantages and disadvantages of going public were described above. However, going public through a shell or blind pool has certain different pros and cons, some of which are discussed below and all of which must be carefully considered.
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Advantages
1. Saving time - Acquiring a "shell" can save an enormous amount of time over the company doing an initial public offering (IPO) of it's stock. A shell can be completed in 1 to 2 month versus 6 to 12 months of doing a public offering.
2. Saving money - Depending on the type of a "shell' that is acquired and the assets that might be in it, the cost can be considerably less than a full public offering. There are usually no underwriter fees or commissions to be paid.
3. Saves on legal work required - The acquisition of a shell can require far less legal work and expense than an IPO.
4. Do not have to be an exciting company - A company attempting to do an initial public offering of their stock would usually have to be a very exciting company in an interesting market, or have substantial revenues and profits in order to attract the interest of an underwriter. Any company of any size can become a public company if the company has the dollars to acquire a "shell".
5. Raising additional dollars - After acquiring a "shell" a secondary offering of company stock to raise additional operating capital can be started immediately. This can usually result in the company receiving more money at a higher valuation of the company than would otherwise be possible through a private placement. The ability to complete future financing is enhanced through such tools as warrants.
6. No concern for underwriters performance - Going public through a merger with a shell eliminates concern for the stock market in general, the Dow, world events or an underwriter's ability to perform.
7. The entire stock-for-stock exchange can be (and usually is) handled as a tax-free transaction.
8. The reverse merger works well for foreign companies desiring entry to the U.S. capital markets.
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Disdvantages
1. No money raised - While making the company a public corporation, merging through a shell does not allow for raising needed capital for the company as would an I.P.O.
2. Cost involved. Although usually far less than an IPO, there is still substantial costs involved in acquiring a shell, and all cost are paid upon completion of the deal.
3. The percentage of the company that is relinquished up front in order to become a public company. (Usually a minimum of 10% which is owned by the public shareholders).
4. The lack of a shareholder base in the new public entity.
5. The shares are normally not immediately tradeable on the NASDAQ system.
6. Due to the quick nature of the transaction, management of the company is sometimes not fully prepared for the more open disclosure of financial information, reporting requirements, and investor relations that is needed to successfully operate a public company.
Yes thats was before the Reverse split rumour. After that i told everybody i was out. Then the truth comes out that there is more dilution. Get your timelines correct before you post past posts.
No empirical evidence. With a nearly a billion shares o/s and a market cap of 24 million they are going to find it hard to list elsewhere. With a share price of only 3 cents might as well reverse split and dilute some more afterwards. My advice is thats its time to dump this stock.
I meant reverse split but hey come to think of it why not a reverse merger into the company they are buying and then a listing to a larger exchange. I don't how these things work fully but it could be an interesting idea. Might go private again and get themselves off the pinks with a view to a listing elsewhere.
Thats the problem to many uncertainties with NWOG.
Sorry folks but the stock is starting to look like a R/M is in the works.
No we need a PR stating who they will be R/M with. Everything else is just possibilities. I would prefer they don't put out PR's like the one for WRII. I want a PR saying they have done the deal and will be completed in so many days. Everything else is fluff.
Its just a rumour. Could make sense dilute the stock to reduce the NDOL scammers hold even furthur as eik has suggested then R/S. Even with a reverse split 10-1 this stock could be worth a gamble around 2 cents.
Wow these guys are diluting like there is no tomorrow or its one last dilution before a reverse split in the future imho.
Thanks Niemand excellent news. A member mark for you,you deserve it. Are you still in AURC?
investwise i don't seem to be getting your alerts recently could you resend it. I will give you my email again. Thanks.
I don't think it will take 6 months to know if Barite becomes the R/M candidate but i would expect we would know within 2 months. I don't expect any significant news in the near term since the company has just started the interview process.
Why does every one think there will be news next week. Don't these things take time.
Its been worth the wait.
Barite pacific website is very interesting. They are without doubt wanting to become a listed company. They even have a stock quote link and a financial information link all set up. One can only hope the deal goes thru with ONMC. Definantly an easier route then going thru an IPO.
Yep there pushing it up as soon as there is an inkling of somebody wanting in.
I'am buying here.
Without a positive confirmation that Barite will be the R/M candidate this will head south. If Barite does become the suitor then this could easily be a 10X bagger from here. Worth a gamble i guess.
Managed to get a little at 0.03 will be buying more if the opportunity comes. Possibly a large holder got fed up and is getting out.
Good luck to them if they want out pennypusher,they no not what they do. This one will be a big winner when the deals get closed.
The business model is exceptional if they have the funding to execute. Lots of pension funds out there looking for safe havens. Medical services are going to be around no matter what happans to the the US economy,the baby boomers will want healthcare what ever the cost.
Excellent work Niemand. Thanks for sharing the great news. Especially regarding the subprime mortgage info not effecting them. I always thought it would be benifacial to them but i was alittle worried if there would be a credit type crunch on getting funds.
Anybody know what the float is on this stock. Its certainly acting as though the float has gone.
I have took advantage of some deals on the big board. Took a position in NTO very near thursday's bottom. Only consideration would be its copper hedge's. However its following AUY and i think the banks have an interest that the MDG aquisition take place.
Also took a position in SRGG. Tar sand companies need lots of capital to come to fruition but this one does have i believe 25 cents per share in cash,and its sold well below this on thursday. Might be worth a speculative buy. BQI recovered recently from its lows so interest might be picking up again in this area. Only pinks i own now are GSIEF,MAUG and ONMC.
They probably should have spent the time cleaning up the previous shell they were going to reverse merger into. Can't imagine there was anything unsumountable.
Currently the price of Barite is around $275-$320 per tonne. Mexico has some of the purist form od barite in production. Also the 6th largest producer country.
I guess someone selling some of their position to get in on another alert. I'am thinking of buying some more,might as well take the opportunity.
$43 billion in loan deals pulled in past two weeks
Loans and related risky debt deals reach staggering levels as more go bust
By Murray Coleman, MarketWatch
Last Update: 6:26 PM ET Aug 9, 2007
SAN FRANCISCO (MarketWatch) -- In the past two weeks, another 13 corporate loan or bond deals have been postponed or reduced, representing slightly less than $43 billion, according to research released Thursday by Baring Asset Management.
That raises the total number of financing deals pulled from the market since June 22 to 46, representing more than $60 billion, analysts at the firm said. No deals were pulled last year, according to the firm.
Toby Nangle, a fixed-income manager at Barings, estimated that banks financing leveraged buyouts and management-led buyouts have been left with an estimated $400 billion on their balance sheets.
"The bond and loan markets know that banks will come knocking sooner or later, asking to refinance loans that they have made to private-equity firms," Nangle said.
Bankers thought that such loans would only present short-term credit risk, the analyst said.
"Given their inability to pass this credit risk on to the market, their short-term acquisition finance is increasingly looking like a series of long-term loans," Nangle said. "As a result, many financiers are unwilling to stretch themselves further, and bond market participants can continue to ask for more attractive terms before committing capital to risky corporate loans and bonds."
"The lack of demand for structured credit, which is ultimately where much of the private-equity funding has previously been ending up, is a key factor and should it fail to return, the conditions in credit markets may become even tougher," Nangle said.
Chrysler ran into a snag in late July when sales of roughly $20 million of loans were delayed, as was the acquisition of Alliance Boots. Banks that had arranged the financing were left holding on to billions of dollars worth of loans to support the transaction. See full story.
The financing eventually went through, though much of it had to be assumed by the company itself and the banks underwriting that debt. That large of a scare reportedly has helped dry up financing for more leveraged loans and high-yield debt.
Other delayed or cancelled deals of significance estimated by Fitch Ratings in July alone include those planned by Allison Transmission, Quebecor Media, J&F Finance, High Artic Energy and Servicemaster Corp.
The ongoing liquidity issues facing lenders and bond issuers in riskier areas of the fixed-income market has spread to a point where overseas bankers are taking action. Also on Thursday, the European Central Bank said it allocated 94.841 billion euros to 49 bidders in a one-day quick tender at 4.0% to add liquidity to the money market.
"The liquidity providing fine-tuning operations aims to assure orderly conditions in the euro money market," the ECB said. It aimed to allot 100% of the bid received. See full story.
Also, French bank BNP Paribas said Thursday that it will temporarily stop valuing three of its funds and won't allow customers to withdraw their investments after U.S. subprime-mortgage woes led to the "complete evaporation of liquidity." See full story. End of Story
LONDON (MarketWatch) -- BNP Paribas, one of the largest banks in France, said Thursday that it will stop valuing three of its funds and is suspending investor withdrawals after U.S. subprime-mortgage woes led to the "complete evaporation of liquidity," the latest sign of housing market troubles in the world's biggest economy rippling across the globe.
The move helped reignite credit market worries. Several other European firms have frozen funds in recent days. Dutch investment bank NIBC Holding, owned by buyout firm J.C. Flowers & Co, has also taken a big hit from its subprime investments.
Fears of a broader credit squeeze prompted the European Central Bank and the U.S. Federal Reserve to pump roughly $150 billion into capital markets to boost liquidity. See full story.
BNP's (FR:013110: news, chart, profile) BNP Paribas Investment Partners unit said the decision was taken "to protect the interests and ensure the equal treatment of our investors during these exceptional times."
"The complete evaporation of liquidity in certain market segments of the U.S. securitization market has made it impossible to value certain assets fairly regardless of their quality or credit rating," the bank added in a brief statement.
A spokesman said the total value of the three funds had fallen roughly 20% to just under 1.6 billion euros in less than two weeks. He added the funds had a total subprime exposure of around 700 million euros on July 27, though he didn't have any data on how much it had fallen since then.
Chart of FR:013110
BNP said it will resume valuations as soon as liquidity returns to the market and it is able to reliably value the funds again.
The three BNP funds affected are Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia. They invest in U.S. asset-backed securities, which are pools of debt that include mortgages.
Shares in BNP slipped 3.9% in midday Paris trading, dragging on the wider banking sector. Societe Generale (FR:013080: news, chart, profile) lost 2.5% and Credit Agricole (FR:004507: news, chart, profile) slipped 3.5%.
Subprime mortgages are offered to less creditworthy borrowers. After the loans are originated, they are often packaged up and sold as mortgage-backed securities to institutional investors such as banks, insurers and hedge funds.
These securities can also be sliced up again in Collateralized Debt Obligations, which are a bit like mutual funds that buy different types of asset-backed securities. CDOs bought some of the riskier parts of subprime mortgage-backed securities in recent years, helping to fuel the U.S. housing boom.
But this system of slicing and dicing has begun to unravel in recent months as delinquencies on subprime mortgages and other less risky home loans have increased while house prices fall.
Two hedge funds run by investment bank Bear Stearns (BSC :
BSC114.05, -7.07, -5.8% ) were almost completely wiped out earlier this year after losing more than $1 billion, partly from leveraged subprime mortgage bets that went awry.
Several other funds have been hit hard by the ensuing contagion in credit markets.
BNP's decision follows a similar move on Friday by German fund manager Union Investment, which suspended redemptions in one of its funds that has exposure to the U.S. subprime market through ABS investments.
Union Investment argued that it didn't want to be forced to sell assets in a market that would command steep discounts. See archived story.
U.S.-German joint venture WestLB Mellon Asset Management also cited liquidity when it suspended redemptions on an ABS fund on Tuesday. And on Monday Frankfurt Trust put a stop to withdrawals from its 160 million euro ABS fund.
Also sparking subprime worries in Europe Thursday Dutch bank NIBC said it took a one-off loss of 137 million euros on its U.S. ABS investments in the first half of the year, with further losses still to come.
The continuing credit worries also sparked action from Germany's Bundesbank and the European Central Bank.
The Bundesbank called a meeting to weigh a rescue package for troubled lender IKB (DE:806330: news, chart, profile) , while the ECB said it stands ready to act to preserve liquidity in money markets. See Europe Markets. End of Story
Bankers Report Interbank Lending Shut For Two Hours Over German Bank Crisis
August 9, 2007 (LPAC)--A senior European banking source reports that the interbank money market closed down this morning for two to three hours, for the first time ever. Rumors had spread that the German Bundesbank was holding an emergency meeting because of a collapse of a major German bank, believed to be Westdeutsches Landesbank, one of the largest in Germany. The Bundesbank then released a statement saying that the meeting was to discuss the IKB banking crisis.
The source said that a Westdeutsches Landesbank failure would have collapsed the entire global financial system. The source underlined that this ongoing crisis is far worse then anything he has witnessed.
The next threat to the banking system in Germany, which will have obvious global ramifications, is what is called Asset Backed Commissioned Paper. Banks issue these to customers such as hedge funds and other banks, which, theoretically, can draw on them in case of emergency. The problem is that banks have been issuing far more then they should have. The deadline for the hedge funds and other customers to draw on these ABC-Ps is between August 13 and 15. If their customers rush to draw on them, this will be unsustainable for the banks.
The source said that these ABC-Ps were involved in the IKB bank crisis, because its Rhineland Funding unit had drawn on one of these, forcing IKB to cover it. Then IKB requested to draw on one of these ABC-Ps it had with Deutsche Bank, but the latter refused to honor it, and IKB collapsed.
Another senior banking source told EIR that he too had heard that the interbank money market had closed, and it had been closed under orders of the European Central Bank (ECB), so that the latter could funnel emergency credit to selected, troubled banks.
Meanwhile Bloomberg News reported that the ECB, in an "unprecedented" response to banks in desperate need of cash, loaned 94.8 billion euros to these banks. This followed a jump in overnight lending rates the banks charge each other, to the highest level in six years.
I would have liked to carry on holding this stock,dreaming of its potential but in the light of recent developments,i'am out. I will be watching from the sidelines hoping they eventually manage to get things right.
I'am starting to think all Russian stocks are toxic. NWOG even thinking of a R/S without any concrete deal smells of desparation.
May be an opportunity to buy some cheapies before the news hits.
Sounds good but in reality it would be a disaster.
If i smell a reverse split,i'am out of here as fast as i can go.
They are already on the right track. Get the production up then share buy backs are the way to go. Aquisitions done when possible using debt is ok.
I would rather have a solid company at 5 cents then pie in the sky dreams of outsmarting the pink MMs.
Sorry i missed the Aug 9th date,i read it too quick. Thanks.
I wish i could write their PRs for them. Does this mean they will publish their asset valuation before aug 14th or on the 14th in conjunction with a shareholder meeting.
Nice westeffer,i am sure you will be rewarded very soon.
The positive about AURC finally is that they seem to have a legit communication line thru L2L. That is a big step in the right direction. Paying of the taxes they owed was another.
Anyone know what may be happaning? Wow somebody wants in.
Bought another 50k at 6 cents. Looking good here.
I hope you get it. Looks like something is happaning. I'am pleased for all of you.
By that time the USA will have nothing to sell the rest of the world because the emerging countries will own most things worth anything. In the process they get consumers who don't know how to save. Oh wait we still have some of the latest nuclear warheads for sale.