There are two groups of people reading this post; I apologize to both of you because I'll try to take the time to write this post so as to be relevant to both groups. One group knows what a reverse merger is and wonders why I suggest that you run away from it. The other group wants to know what a reverse merger is and why I suggest that you run away from it.
For group two, a reverse merger is a merger between a private company, typically with a small but promising business, and a public company that has discontinued its operations, leaving only a "shell" with publicly traded shares. The transaction is usually structured with the public company acquiring the private one and subsequently changing the name of the public company to the name of the private company. Because the public company had no operations, it likely had no officers. The private company officers become the officers and directors of the public company. Voila, the private company is public without a public offering. Oftentimes, a third party or parties, will contribute equity capital to the newly combined company to provide needed capital.
It sounds easy enough, so you ask, what's wrong with that?
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