David Feldman's book, Reverse Mergers: Taking a Company
Public Without an IPO, now in its third printing, was published in 2006
by Bloomberg Press (available on http://www.amazon.com).
View David Feldman's reverse merger blog at www.reversemergerblog.com.
Joseph Smith and David Feldman are coauthors of PIPES:
Revised and Updated Edition - A Guide to Private Investments in Public Equity
(Bloomberg Press, 2005) available on http://www.amazon.com.
In the News
David
Feldman referenced in an article on
the SEC proposed amendments to S-3 and
Rule 144 in the Reverse Merger Report
on July 12, 2007.
SEC
Seeks Comments on S-3 and 144 Amendments
Just
one month after the Securities and Exchange
Commission announced sweeping changes
to several regulations effecting reverse
merger transactions; it has begun requesting
comments on two of the six proposals:
reducing the Rule 144 holding period
for restricted stock in reporting companies
to six months and allowing smaller companies
to register shares for primary offerings
using Form S-3.
The commission is still working on four
other proposals, including the elimination
of SB forms for smaller reporting companies,
and a retooling of Regulation D. Each
proposal will receive about 60 days
for comment from the public.
The proposals have generally been extremely
well received by reverse merger professionals,
but many say that the amendments could
still be improved. Ambiguity still surrounds
how Rule 144 changes would affect shareholders
in reverse mergers, which frequently
include a simultaneous private placement.
Several securities attorneys that RMR
spoke with each offered up slightly
different interpretations of the SEC's
proposals and all said they would seek
clarification in their comments to the
commission.
Another gripe involves the S-3 amendment,
which while offering access to expedited
registration via Form S-3 for the first
time to companies with less than a $75
million public float, also would restrict
them from selling more than 20% of that
float in an S-3 offering over any 12
month period. Shells would also be restricted
from using S-3 for 12 months after they
merge with an operating company, and
would only be permitted to use S-3 for
primary offerings.
A welcome addition to the proposals
was a change to eliminate some restrictions
under the commission's Worm/Wulff letters
interpretation. Worm/Wulff has prevented
certain restricted stockholders in shell
companies from using Rule 144, and those
securities had to be registered before
being resold.
According to the proposal, shell stockholders
could sell under 144 when their company
ceases to be a shell, is subject to
reporting requirements of Section 13
or 15(d) of the Exchange Act, and when
they've filed all require reports during
the previous 12 months or other appropriate
period. Most importantly, issuers would
have to wait at least 90 days after
filing current Form 10 information,
typically found in a "Super 8-K."
One wrinkle in the Worm/Wulff reprieve
surrounds the 90 wait. Some language
seems to suggest the holding period
begins on either the day the company
filed the Form 10 information or when
the securities were acquired, which
is later. In the context of an APO,
that would imply that private placement
investors would have registered stock
available to trade less than six months
from issuance.
There is also some ambiguity as to whether
affiliated shareholders will be treated
differently than non-affiliates. Reverse
merger specialist David Feldman, who
has been in touch with the commission
on the ambiguous wording, believes the
SEC will apply a six-month holding period
to all shell security holders to being
on the "Super 8-K" filing date.
