Use of Reverse Mergers to Bypass IPOs: A New Trend for Nanotech Companies
Volume 4, Issue 1
Thomas L. James
The costs and uncertainties involved with an initial public offering of securities by privately owned companies have led to a new avenue for such companies to enter the public market by merging with and into a “public shell” in a reverse merger transaction. In this transaction, the business of the private company becomes the business of the previously empty public shell company, and the shareholders of the private company end up controlling the public company. This “back door” method of becoming a public company is gaining popularity with many types of companies, including nanotech companies, which are capital intensive businesses that need access to greater and more readily available sources of capital than are traditionally only available for public companies. In this article, Thomas L. James, a partner in
the national law firm of Foley & Lardner LLP, summaries how this process works and the potential pitfalls to watch out for by any interested nanotech company.
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