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INFO: Reverse merger

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Psionic Trader   Sunday, 08/05/07 10:44:46 AM
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INFO: Reverse merger

Great online book (Not 100% free though)
http://tinyurl.com/2khv3t

Reverse Merger / Reverse Takeover

A reverse merger is a method by which a private company can achieve the status of being listed publically. During a reverse merger, a private company merges or 'takes over' or 'reverses' with an corporate entity that is already listed on an exchange and traded publically.

This public corporate entity is a shell because it doesn't have any assets or liabilities. A 'shell' has nothing more than a corporate infra structure in tact.


Reverse Mergers can be a stock for stock transaction, or stock for assets transaction

Stock for Stock

During a "stock for stock" transaction, stocks of the public company is issued for stocks in the private company. (Sort of like, give and take in equal amounts) The private company can become a "wholly-owned subsidiary" of the public company... or the private company can be completely assimilated by the public company.

Stock for Asset
In a stock for assets transaction, stock is issued in exchange for assets. The shell company receives the assets and gives the private company their stock.

Companies can get a new ticker and a corporate name.


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