I've thought about the same things you bring up. Here's what I've come up with:
1) Speed. When becoming public needs to happen quickly, a R/M is the way to go.
2) Cost. An IPO will generally cost 7-8% in commission fees, along with (in the case of a larger IPO) fixed fees of $3-$5M, so say a total of 10%. So in your example, I have $100 of a private company, sell 30% to the public, but only get 20% ($20).
3) Security. Public companies, being subject to so many reporting rules and regs, generally inspire a lot more confidence in investors than private companies, unless they give up some control to the investors.
4) Control. After a R/M, it would not be difficult to manipulate the share structure to a) maintain a tight grip on control, while b) decreasing the % the existing shareholders own, and c) raising all the capital the market will bear. So I would fully expect that the 24% (or 30%) of the common shares in the float would get decreased down to 5-10% or thereabouts, and VOILA! you're at the same "cost" as an IPO.
In conclusion, in your example of a private company with $100 doing a R/M, taking 70% of the existing public company, converting their 70% (or portion) into Preferred Convertible Voting Shares, doing an A/S increase, thereby a) raising capital, and b) diluting (thereby lessening) the % of the total O/S of the original shareholders. They own $70 (which can be converted into 70% of the new total - say they raise $1M), and we, the original shareholders, now own 5% of the new total (5% of $1M = $50,000). How it falls out by R/M? They own (by converting Preferreds back into Commons) $700,000 and have control. We own $50,000 with no control, and they've raised $250,000 with which to bring their plan into fruition. OR - they can stay private and be worth the WHOLE $100.00!
That's how the public markets work!
