Reverse Merger And Backdoor Listing And Corporate Financing Strategy

Reverse merger (reverse merger) is also known as reverse takeover (reverse takeover, reverse buyout, reverse acquisition).

Reverse merger refers to a non-listed company holding the absolute control of a listed shell company with the help of an investment bank consultant.

On the one hand, non-listed company has achieved the purpose of fast stock listing through reverse merger; on the other hand, many businesses have already shrunk, and the listed shell companies whose valuation is very low also need to avoid bankruptcy or delisting by reverse merger so as to achieve their own equity value.

The operation mode of reverse merger and backdoor listing is: the acquisition company and a listed shell company agree on the conditions of reverse takeover; the listed shell company will issue additional shares to the shareholders of the main body of the acquisition company; the acquisition company will become a subsidiary of the listed shell company.

In the reverse merger and backdoor listing pactions, the number of shares issued by listed shell companies is much larger than the total number of shares issued by the shell companies. In this case, the shell company acquired the main company, in fact, the shareholders of the main company controlled the merged listed companies because of the shares held by the listed companies.

The reverse merger and backdoor listing and corporate financing strategy as a financing strategy, the main company can make private financing before reverse merger, and the equity of private equity investors can be converted into shares of listed companies immediately after the backdoor listing of the main companies, so investors are often willing to invest in advance.

After successful reverse merger, the listed company can make secondary offering or PIPE financing at the right time.

However, because of the need for a process of refinancing after listing, reverse acquisition is suitable for those short-term financing needs that can be solved through a small number of private equity offerings before listing, and companies who are not eager to finance after half a year or even longer after listing.

If the enterprise adopts the IPO, its business is temporarily difficult to be publicly disclosed by investors in the stock market, and the enterprises are not eager to raise money in the open market.

Example: Shenzhen blue dot is listed in the US in 2000 March 6th, the blue dot of Shenzhen software company, which specializes in Linux operating system, was successfully listed in the US OTCBB market, and the stock code BLPT.OB.

Less than 1 hours after the opening of the first day, the share price rose from $6 to $22, and its market value exceeded $400 million.

To create such a brilliant blue dot Linux, less than half a year ago, with a registered capital of only 200 thousand yuan, its 5 entrepreneurs are less than 30 years old.

With the help of consultant K&J Consulting and Ltd., blue point adopted the strategy of reverse merger, that is, first contact the shell company of OTCBB, and the stock company issued a blue print from the shell company. The number of shares issued is much larger than that of the shell company itself, so that the American shell company has acquired the majority of the shares of the merged company when it acquired Chinese companies and actually changed into a foreign company in Chinese companies.

Under the arrangement of the consultant company, blue point obtained 800 thousand yuan of private capital before listing. In addition to paying the audit fees approved by the US SEC certified accountants, most of the listed fees are paid in the form of listed company stock.