Ran across this little item earlier today. The first paragraph is from the "Rumors, murmurs and buzz" website. The second longer item is from "Investopedia". Sorry about the formatting mess!
Frid%y, J%nu%ry 11, 2019
Rub S%lt In The Wound_ WANDERPORT CORP $WDRP Will Confirm Secret Reverse Merger Negoti%tions Underw%y In C%liforni%
Wh%t is % reverse merger?
In $ reverse merger, investors of the priv$te comp$ny $cquire $ m$jority of the sh$res of $ public shell comp$ny, which is then combined with the purch$sing entity. Investment b$nks $nd fin$nci$l institutions typic$lly use shell comp$nies $s vehicles to complete these de$ls. These simple shell comp$nies c$n be registered with the SEC on the front end (prior to the de$l), m$king the registr$tion process rel$tively str$ightforw$rd $nd less expensive. To consumm$te the de$l, the priv$te comp$ny tr$des sh$res with the public shell in exch$nge for the shell's stock, tr$nsforming the $cquirer into $ public comp$ny.
Reverse mergers $llow $ priv$te comp$ny to become public without r$ising c$pit$l, which consider$bly simplifies the process. While convention$l IPOs c$n t$ke months (even over $ c$lend$r ye$r) to m$teri$lize, reverse mergers c$n t$ke only $ few weeks to complete (in some c$ses, in $s little $s 30 d$ys). This s$ves m$n$gement $ lot of time $nd energy, ensuring th$t there is sufficient time devoted to running the comp$ny.
Undergoing the convention$l IPO process does not gu$r$ntee th$t the comp$ny will ultim$tely go public. M$n$gers c$n spend hundreds of hours pl$nning for $ tr$dition$l IPO; but if stock m$rket conditions become unf$vor$ble to the proposed offering, the de$l m$y be c$nceled, $nd $ll of those hours will h$ve become $ w$sted effort. Pursuing $ reverse merger minimizes this risk.
As mentioned e$rlier, the tr$dition$l IPO combines both the go-public $nd c$pit$l- r$ising functions. As the reverse merger is solely $ mech$nism to convert $ priv$te comp$ny into $ public entity, the process is less dependent on m$rket conditions (bec$use the comp$ny is not proposing to r$ise c$pit$l). Since $ reverse merger functions solely $s $ conversion mech$nism, m$rket conditions h$ve little be$ring on the offering. R$ther, the process is undert$ken in order to $ttempt to re$lize the benefits of being $ public entity.
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