Tggi going big
PROS:
Reverse Mergers offer an expedited process that is much more cost effective in comparison to the IPO. Conventional IPOs take months and even over a full calendar year at times while the average time span for reverse mergers is measured in weeks and even as quickly as 30 days. This ensures that team players have sufficient time and energy devoted to running the company. Additionally, Reverse Mergers are not market dependent. As mentioned above, the main purpose is NOT a cap raise but instead a vehicle for share liquidation. This means that macroeconomics play a lesser role on the consummation of the deal.
Traditional IPOs offer the main advantage of a much more lucrative cap raise. Moreover, conducting a traditional IPO allows the founders and investors to own 100% of the public entity whereas it is common to find public shells with 10%-20% accounted for with existing stockholders for reverse mergers.
The Pros And Cons Of A Company Going Public
Small companies looking for growth often use an initial public offering to raise capital. But going public brings both…
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CONS:
Reverse IPOs present a number of potential problems and require extensive due diligence. The company must be comfortable with inheriting potential pending liabilities known as “deal warts” which is a result of litigations between the company, founders, investors, miscellaneous shareholders and third-party entities.
Traditional IPOs also contain many drawbacks. As mentioned above the process is lengthy and demands many resources, time and a significant amount of capital. Similarly, investors and founders alike will have difficulty with liquidation. There is a 6–12 month restriction for stock liquidation (with an occasional 10% total holding stock). This restriction is used to safeguard both the company and the stockholders. This prevents the possibility of insider trading with a dump of shares onto oblivious buyers as well as safeguards the company’s valuation from plummeting, as a result, selling shares from an uneducated employee, investor or management member that own a significant portion of stock.
