Reverse mergers : and other alternatives to traditional IPOs

305 Pages·2009·1.509 MB·English

by  Feldman, David N., Dresner, Steven

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Praise for the new edition of
Reverse Mergers
And Other Alternatives to Traditional IPOs
By David N. Feldman

With contributions by Steven Dresner

“R everse mergers and self-filings are important alternatives to
traditional IPOs, but with recent rule changes and developments
in the market, these transactions have become more complex than
ever. David Feldman’s second edition of Reverse Mergers explains
these important developments in plain English and is an invaluable
resource [for] any participant involved in the business of taking
small companies public.”
—Timothy J. Keating

President, Keating Investments

“ David Feldman’s new edition of Reverse Mergers is a must for any
practicing securities lawyer’s library—along with Romeo and Dye’s
Section 16 treatise and Hick’s Resales of Restricted Securities. Once
again, in clear and concise language, Feldman takes the reader
through the often-tricky landscape of reverse mergers and alternative
public offerings and, by way of illuminating real-world anecdotes,
teaches the reader how to avoid the potholes and use this fi nancing
technique to its fullest potential. A masterful book by the master in
the reverse-merger area.”
—Mitchell C. Littman, Esq.

Founding partner, Littman Krooks

“ David Feldman’s Reverse Mergers is the most current go-to source for
dealmakers, investors, and entrepreneurs [interested in] going public
without an IPO.”
—Chandra S. Mishra, Phd
Eminent scholar and professor, Florida Atlantic University
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“ Feldman’s Reverse Mergers should be required reading for any company
planning to go public. It is the definitive source of information for issu-
ers and for professionals involved in executing these transactions—and
a roadmap for the industry to follow for many years to come.”
—Richard Rappaport, ceo

WestPark Capital

“ Feldman has a unique ability to walk companies through the reverse­
merger process. His thorough understanding of all of the alternatives
enables companies to make good business decisions. Reverse Mergers will
prove to be invaluable for any company thinking of going public.”
—Charles Weinstein

Managing partner, Eisner LLP

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Reverse Mergers

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Also available from Bloomberg Press
The Issuer’s Guide to PIPEs:

New Markets, Deal Structures, and Global Opportunites

for Private Investments in Public Equity

Edited by Steven Dresner
PIPEs: A Guide to Private Investments in Public Equity

Revised and Updated Edition

Edited by Steven Dresner with E. Kurt Kim
Hedge Fund of Funds Investing:

New Strategies for the Hedge Fund Marketplace

by Joseph G. Nicholas
Market-Neutral Investing:

Long/Short Hedge Fund Strategies

by Joseph G. Nicholas
Due Diligence for Global Deal Making:

The Defi nitive Guide to Cross-Border Mergers and Acquisitions,

Joint Ventures, Financings, and Strategic Alliances

Edited by Arthur H. Rosenbloom
The Securitization Markets Handbook:

Issuing and Investing in Mortgage- and Asset-Backed Securities

by Charles Austin Stone and Anne Zissu
A complete list of our titles is available at
www.bloomberg.com/books
Attention Corporations
This book is available for bulk purchase at special discount. Special editions
or chapter reprints can also be customized to specifications. For information,
please e-mail Bloomberg Press, [email protected], Attention: Director of
Special Markets, or phone [phone].
00_Feldman_FM.indd iv 10/13/09 11:34:04 PM
Reverse Mergers

And Other Alternatives to

Traditional IPOs

Second Edition
David N. Feldman
With contributions by Steven Dresner
Bloomberg Press

New York

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© 2006, 2009 by David N. Feldman. All rights reserved. Protected under the Berne Convention.
Printed in the United States of America. No part of this book may be reproduced, stored in
a retrieval system, or transmitted, in any form or by any means, electronic, mechanical,
photocopying, recording, or otherwise, without the prior written permission of the publisher
except in the case of brief quotations embodied in critical articles and reviews. For information,
please write to Permissions Department, Bloomberg Press, 731 Lexington Avenue, New York,
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This publication contains the authors’ opinions and is designed to provide accurate and
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First edition published 2006
Second edition published 2009
1 3 5 7 9 10 8 6 4 2
Library of Congress Cataloging-in-Publication Data
Feldman, David N.
Reverse mergers : and other alternatives to traditional IPOs / David N. Feldman ; with
contributions by Steven Dresner. – 2nd ed.
p. cm.
Includes bibliographical references and index.
Summary: “The top expert in the field of reverse mergers provides an executive summary along
with nuts and bolts explanations showing how these deals are done. The revised edition addresses new
regulations, SPACs, growth in China, and other key topics”–Provided by publisher.
ISBN 978-1-57660-340-6 (alk. paper)
1. Going public (Securities) 2. Going public (Securities)–Law and legislation–United States.
3. Corporations--United States--Finance. I. Dresner, Steven, 1970- II. Title.
HG4028.S7F45 2009
658.1’64–dc22 2009039854
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I am thrilled to dedicate this second edition to the

three people that matter most to me in the world.

My amazing wife Barbra remains my sounding board,

best friend, and life partner. And, of course, my

kids: Sammi brings me great pride in her talent and

dedication to helping others, and Andrew never fails

to bring me joy and amazement at his extraordinary

intelligence and unbridled love for life.

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C O N T E N T S

List of Illustrations .................................................................xv

Acknowledgments ................................................................ xvii

Introduction...............................................................1

The Structure of This Book................................................................... 4

1 Why Go Public?..........................................................9

Advantages of Being Public.................................................................... 9

Access to Capital ............................................................................... 9

Liquidity ..........................................................................................11

Growth Through Acquisitions or Strategic Partnerships ....................11

Stock Options for Executives ............................................................12

Confidence in Management ..............................................................13

Disadvantages of Being Public .......................................................... 13

Emphasis on Short-Term Results ......................................................14

Public Disclosure ..............................................................................14

Fraud and Greed (Even After Sarbanes-Oxley) ..................................15

It’s Expensive! ...................................................................................16

Public Companies Attract Lawsuits ...................................................17

Weighing the Pros and Cons ................................................................18

PART ONE | THE BUSINESS OF REVERSE
MERGERS
2 IPOs Versus Reverse Mergers..................................... 23

Advantages of a Reverse Merger Versus an IPO ...................................27

Lower Cost .......................................................................................28

Speedier Process ...............................................................................29

Not Dependent on IPO Market for Success ......................................30

Not Susceptible to Changes from Underwriters Regarding Initial

Stock Price ...................................................................................32

Less Time-Consuming for Company Executives ................................32

Less Dilution ....................................................................................33

Underwriters Unnecessary ................................................................33

Disadvantages of a Reverse Merger Versus an IPO...............................34

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