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Replies to post #9357 on All Things Mobile Analytic Inc (ATMH)
Companies want to become public through an APO for several reasons. The public shell company already has shareholders, so after the APO is complete, the formerly private company typically already meets the shareholder requirements for NASDAQ and AMEX; 400 and 300 respectively. A company that goes public through an IPO must sell its stock to a large number of shareholders in order to meet these requirements necessitating a broad marketing and roadshow process. Unlike an IPO, there is no public disclosure required until the transaction closes. Customers, suppliers, employees, and press are unaware until closing. Therefore, a private company can pursue going public through an APO and understand what kind of investor response and valuation they will receive without having to make the “leap of faith” requirement of an IPO. With an IPO a company must publicly announce its intentions and file with the SEC at the beginning of the process. It is only after clearing comments with the SEC and after going on the roadshow that a company learns what kind of investor response and valuation it will receive.
The APO model owes much of its success to the involvement of the Investment Bank as the gatekeeper that standalone reverse mergers never had. In a traditional reverse merger, anyone could simply buy a shell and go public whether or not they had sufficient financial performance to justify being a public company. With an APO, the investment bank would not raise capital for a company that it did not believe would be successful in the marketplace. This is why the APO has such a high success rate. The investment bank also brings research, trading and liquidity to the company’s stock after the transaction closes. Investment banks find the APO process appealing because they can receive the same fees and breakage for raising the capital as they do in an IPO in a much condensed period of time and to a significantly smaller number of investors.
08/19/16 5:41 PM
