I will address both messages from Eddo and Wick.
Eddo, your question is a valid one. There are problems with a R/S in 90% of the companies that make such a move. The negative aspect on a R/S is a stigma that carries most companies on the surface as an issue with respect towards equity type financing. Shareholders rarely benefit from a R/S. The process for many of the companies is just a venue to continue the dilutive nature to keep printing shares.
Now it has to be said that in certain cases a R/S elevates the intended company to speed up the desire to move to a higher exchange. This involves the intended company to meet requirements based on numerous factors like rev ,shareholder participation and a stable share price along with other factors.
You asked why doesn't the new entity do the R/S. R/M is a marriage with a reporting Co. (ETEK) with no business model and private company that has a business model who wishes to go public for a number of reasons, but mainly to establish a pipeline for financial instruments to participate in the growth for such company. It would never benefit for the acquired company to be burdened with a R/S left over by the ballooning share structure from the shell. However, if the incoming company has substantial rev. and makes the argument that they would like to move up to a higher exchange by doing a R/S may make sense, but it is a risk.
I would bet that the owner of the shell would be inclined by the acquired company or the potential incoming entity, would and in my opinion do the R/S before the LOI and setup the acquired company a nice clean share structure. This is where I lean towards and most likely will happen.
Mr. Wick
Yes, I know they reduced the A/S and generally is not a factor or is a nonstarter since the A/S is simply the company's vault that these shares can be used for future expansion, providing they aren't maxed out, like they are presently. The shares that needed to be reduced is the O/S. Now, there probably was a reason or maybe several, like notes outstanding and since the company was always trading even when it moved into a dominate shell had to be cleaned out before any R/S. Currently that is all behind now and if the company does have a strong candidate. I expect this subject will come up. It certainly would be to the best interest of the new suitor and shareholders of course by starting a new company on solid footing.
Have a good day
varok
