What is a public shell company?
In this article you’ll learn about what a public shell company is, and why you should consider acquiring one and conducting a reverse merger.
The main reason companies purchase public shells, is because the companies are already publicly traded, and thus can offer “instant,” liquidity, and access to capital. Because the public shell is listed on the OTC, it’s capable of raising funds from Day 1.
Using this shell makes it possible for a startup to avoid the costs associated with having an Initial Public Offering (IPO). This enables entrepreneur to quickly get their startup company in a public exchange so they can begin fundraising. It also makes it possible to have a startup company visible in their industry and attract viable investors. Using a public shell company is a popular way to raise money, but financial experts warn entrepreneurs to be aware of all the challenges involved with it.
It’s important to consider if the image of a public shell company is bad, those who purchase it will have all that negativity passed to them. It is essential for an entrepreneur to do all the necessary due diligence on any public shell company they are considering. It is also a good idea they only work with reputable financial organizations when looking for a such a company.
National Securities Exchange
Purchasing a public shell company may not get an entrepreneur’s company automatically listed on a stock exchange. The majority of public shell shell companies being offered for sale are not listed on a national securities exchange. It is possible for the company to be renamed and then try to get it on a national security exchange. This will cost money and take time. It may also negate any anticipated cost savings from purchasing a public shell shell company.
When an entrepreneur has the opportunity to obtain a public company, they must be aware of how to avoid making regulatory mistakes. It is possible you may face significant civil as well as criminal penalties for non-compliance issues and more. An innocent mistake could cause serious problems.
When an entrepreneur purchases a public shell shell company, they have a business that can become publicly traded at a lower cost. This is much easier than using an initial public offering (IPO). The process of going public and raising capital are combined when an entrepreneur uses an IPO to start their company. When an entrepreneur uses a public shell shell company, these two activities are separated.
When an entrepreneur uses the conventional IPO, it can take several months to make it happen. An entrepreneur can obtain the same result with a public shell shell company in 30 days or less. There is also no guarantee an IPO will eventually be able to go public.
When a public shell shell company is purchased, there is a chance the company’s investors could put a significant amount of their shares up for sale. If this occurs after the company has been purchased, it can have a negative effect on the price of the company’s stocks. An effective method to avoid this is to establish holding periods within the merger agreement. This means those who hold the company’s stock agree to not sell it for a specified amount of time.
A public shell shell company is a good way for entrepreneurs to have their new business gain public company status. It takes less time and can be more cost-effective when compared to choosing the conventional IPO process. It provides the entrepreneur with financing alternatives that are much more flexible. Investors may also experience increased liquidity. Purchasing a public shell shell company makes it possible for an entrepreneur to devote more of their time to running and growing a company.
If you’d like more information about going public with a public shell, then visit our reverse merger article or contact us.