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's masterclass workshop for New
York Business Forums on reverse mergers
is reviewed in Corporate Financing Week
on November 11, 2002.
Are Reverse Mergers an Alternative to
IPOs?
At
a workshop event in New York late last
month, reverse mergers were being touted
as viable alternatives to initial public
offerings. David Feldman, managing
partner at a law firm, Feldman Weinstein,
and the speaker at a workshop hosted
by New York Business Forums, explained
that in a reverse merger a private company
merges with the publicly listed company
with no assets or liabilities. The publicly
traded corporation is called a "shell"
since all that exists of the original
company is its corporate shell structure,
he said. Typically, the private
company's shareholders receive between
65-95% of the stock of the public shell.
Feldman said that IPOs are typically
conducted with the primary purpose of
raising capital. While going public
via a reverse merger does raise capital
by selling shares, usually the companies
are not primarily interested in raising
a large sum of money. Most often, when
companies do reverse mergers, they are
interested in acquiring publicity to
attract higher caliber executives who
want stock options.
Another advantage of going public via
a reverse merger is speed and lower
cost. A reverse merger can take two
to three months to complete, compared
with 12-18 months for an IPO. This is
so because reverse mergers do not require
as many documents to be filed with the
Securities and Exchange Commission.
The cost saving (in the range of 20-50%
versus an IPO) comes mostly from avoiding
the need to hire an underwriter.
