Why Companies Should Go Public Without A Public Shell Or Reverse Merger

By Jason Wilson

Many small companies often wonder how to take a company public. They may have heard in past years about doing a reverse merger with a public shell, which is a very risky transaction.

It’s a really bad idea to do a reverse merger with a public shell corporation. The SEC has made some adjustments that have made public shell corporations nearly obsolete. In these economic times, it’s much more difficult to get a buy a public shell, and the sellers of the shell many times cannot meet the standards when they are reviewed by the buyer. This is a process that the buyer can go through spending thousands of dollars on and end up with the transaction falling through completely.

If the seller of the shell doesn’t comply with the buyers requests and supply the documents necessary to sell their shell to the buyer. If the shell company cannot meet the buyers requests, they will not satisfy the due diligence requests of the buyer, and therefore it will not work. As you can see, this situation is very undesirable and only prolongs the process of going public.


Reverse mergers, or RTO’s (Reverse Takeover) as a way of going public is something all companies should avoid at all costs. Filing a registration statement (typically an S-1 registration statement) with the SEC is a much more advantageous than a merger with a publicly traded company:

A. By filing a registration statement, it allows you to structure your company as you prefer. If you decide to merge with a publicly traded company or shell corporation, you must accept a shareholder base that you are not familiar with and who may sell shares into the market at an unfavorable time.

B. Using a reverse merger to become a publicly traded company rather quickly used to be one of its advantages. This is no longer true, because SEC rules now require that you have your financial statements audited when doing the merger. Prior SEC rules gave you 75 days to have the financial statements prepared. Also, the document which must be filed to report the reverse merger (Form 8-K) must now have the same exact information as the registration statement.

C. Costs are now much more substantial than they used to be. An OTC trading company will demand as much as $750,000 for the reverse takeover process. There are other ways to complete the process of taking your company public for $100k or less, with a small amount of stock included in the deal.

Being a publicly traded company can help a company grow in many ways. The best way to accomplish this is to do it without using a public shell or a reverse merger. Any company has the ability to go public, and with the new SEC rules in effect it makes much more sense to file the S-1 registration statement than to use other methods. It’s easy to see how the costs alone can really make this an easy decision.

About the Author: For information on taking your company public without a

public shell

or a

reverse merger

, please visit Tiber Creek Corporation at www.TCC5.com



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