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Re: Thandster post# 4681

Sunday, 10/28/2007 3:44:12 PM

Sunday, October 28, 2007 3:44:12 PM

Post# of 20865
http://en.wikipedia.org/wiki/Reverse_merger

Benefits

The advantages of public trading status include the possibility of commanding a higher price for a later offering of the company's securities. Going public through a reverse takeover allows a privately held company to become publicly held at a lesser cost, and with less stock dilution than through an initial public offering (IPO). While the process of going public and raising capital is combined in an IPO, in a reverse takeover, these two functions are separate. A company can go public without raising additional capital. Separating these two functions greatly simplifies the process.

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Drawbacks

Reverse Takeovers always come with some history, and some shareholders. Sometimes this history can be bad, and manifest itself in the form of unseen liabilities, sloppy records, lurking lawsuits (lying in wait for the company to gain assets which to pursue), and other skeletons in the closet. Additionally, these shells may sometimes come with angry or deceitful shareholders who are anxious to "dump" their stock at the first chance they get. Possibly the biggest caveat is that most CEO's are naive and inexperienced in the world of publicly traded companies, and are experienced in the public markets. Due diligence and experienced advisors can overcome all of these drawbacks. RTO's can be explosive vehicles for corporate growth, but they are not to be taken lightly.

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