Tinkerine Studios Ltd. (fka TKSTF)

[nightowwl]

Reverse Merger - The Whole Story

Reverse mergers providing innovation hungry Canadian investors with new listings

Every month we’re seeing new listings in the innovation sectors and they’re happening through a process that still isn’t very well understood, even sometimes by the business press. It’s a reverse takeover. You can usually spot one when the Twitter-verse lights up with comments like “Why is a mining company merging with a social media company!?” (or SaaS, or medical marijuana, or 3D printing, take your pick). The short answer is, “they aren’t”. What they are doing is being acquired by a “shell” company. The former business of that shell company, which might have been about nickel or uranium prospecting, is no longer viable, so the vehicle looks to acquire something that is more palatable to the market’s current tastes. The shell will then change its name to that of the new business.

This scenario has played out in the innovation sectors eight times already this year, with names like OneRoof Energy Group, Tweed Marijuana, Revive Therapeutics and Tinkerine Studios going public through vehicles with names such as LW Capital Pool Inc, White Bear Resources, and Carlaw Capital IV Inc. Tinkerine Studios became Canada’s first 3D printing pure play stock after merging with a shell company called White Bear Resources. VP and CFO Martin Burian, a former exec with brokerages Haywood and Canaccord, says the $3.1-million the company was able to raise was simplified by the decision to go public through a reverse merger.

While reverse mergers are normally typified by companies like Tinkerine that are earlier stage than those that choose formal IPOs, it doesn’t preclude them from having success. In 1997, a small company in Milton, Ontario came public through reverse takeover of a publicly listed shell, allowing it to raise a relatively meager $10 million. That company, which was known as Systems Excellence became SXC Health and then Catamaran. Today, with a market cap of nearly ten billion and annual revenue of almost $15-billion, it’s Canada’s second most valuable innovation sector stock.

Reverse mergers providing innovation hungry Canadian investors with new listings