Reverse Merger into a public shell

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Go public without an IPO Using an OTC Shell

Reverse Merger Information

Definition: What is a Reverse Merger

Go Public: Initial Public Offering

Reverse Merger Disadvantages and Risks

Reverse Merger Funding

Reverse Merger Investor Relations

Reverse Merger FAQ

Securities Laws Made Simple


The SEC Process for Initial Public Offerings or IPO

Inquire Now

OTC Shell for Sale

Reverse Merger Plus



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Going Public – Initial Public Offering or IPO

What is going public?

Under the Securities Act of 1933, to sell stock to the public, your company must register with the Securities and Exchange Commission. You file a registration statement with the SEC and when it is released, you may sell stock to the public. This stock can trade in the public market and the company then files under the Securities and Exchange Act of 1934.

Why go public?

  • Money -- Not only do you get new money, but you can more easily raise money in the future -- public companies have an easier time raising money because the investor has a built-in exit strategy. Private companies have no built-in exit strategy and the investor's money is locked in and the investor is therefore reluctant to invest.

  •  Because you can get a better price for the company -- Some private companies who want to sell out go public first to get a higher price

  • To help value the company for estate tax purposes -  To provide a market for cashing out

  • To attract top employees because you can give incentive stock options -- Incentive stock options are an inexpensive way to motivate top employees

  •  To be able to make acquisitions for stock  --  Like being able to print your own money

  • Prestige -- Public companies have a better reputation, are more widely known

  • Financial freedom -- Being public maximizes company options and opportunities

  • Instant Wealth -- nothing beats control of a public company for increasing your net worth

  • Legal Insider Trading -- you can also buy back your stock when it is underpriced and sell it when it is overprices in the market, subject to the insider trading rules. 

Advantages of a Conventional Public Offering

Reverse mergers have developed a bad name recently because of frauds in certain Chinese reverse mergers.

You avoid the risk of buying a public shell with a hidden problem.

You avoid the problem of having the shell merchant dump stock on you in the aftermarket or otherwise manipulating your stock. If your stock is manipulated by the shell merchant, your shareholders may mistakenly think you are doing it.

You save the cost of buying a shell – up to $125,000 for a Pink Sheet shell and up to $450,000 for an OTC BB shell.

Time and Costs of Conventional Public Offerings

1. Time

The SEC can drag its feet and request seemingly endless changes in the registration statement. I have seen deals take over a year to get through the SEC.

I have never seen a company CEO show up for the closing of an offering without large bags under his eyes. An offering can dominate your time for as much as a year in the case of a public offering. Imagine enduring endless meetings with lawyers and accountants, while knowing that all of these professionals you see before you have their meter running at your expense.

2. Money

Brace yourself, it is like buying a house and seeing the long list of costs you are charged.


1-4% of the amount raised. For a small deal. Up to $40,000, for a $10 million deal, Up to $250,000


1-4% of the amount raised. For a small deal up to $40,000, for a $10 million deal up to $250,000


Used to be the big one, sometimes larger than the legal bill. Now prospectus can be delivered over the Internet.


Suit yourself. For small deal, could be $10,000, $10 million deal maybe $50,000

Mailing, telephone, etc.

Figure closing percentage of prospects contacted, number of prospectuses mailed out, average purchase of each buyer, etc.

Federal fees

1/33 of 1% $3,333 for a small deal, $33,333 for a big one.

State fees

These vary from state to state. See the NASAA site for links to state securities regulators.

The Underwriter

An underwriter for an small, speculative deal can take the equivalent of 15% of the proceeds. See Negotiating with the Underwriter.

Transfer agent, stock certificates, etc.

Depends. $5,000 to start, $500 to $5,000 each month, depending on trading and activity.

Due diligence and "dog and pony show" meetings

What ever amount you want to spend, $5,000 to $25,000.

Total as a %

Small deal maybe 30%, large deal maybe 10%.

Click here to see expenses on actual IPOs

Click here to find out your alternatives to going public in an IPO 

Note: The SEC has new rules governing public offerings. See SEC Release No. 33-8591. To find out what this means to you, contact us. 

Click here for the next section, Reverse Merger Disadvantages and Risks

BlogReverse Merger Made Easy

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  • Learn how others have used OTC shells to do reverse mergers.

  • Analyses of public shells and specific merger deals

  • Discover how these stocks traded in the aftermarket.

  • Dirty tricks of shell merchants

  • Special information on supply and demand in the aftermarket

  • How to research reverse merger OTC shells

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About Us John Lux

John Lux, has been an OTC market maker in new issues, shells and other companies, a security analyst, an investment banker, and attorney. He is an investor in venture and public companies.

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Reverse Merger Links

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The Venture Capital Process or Why VCs Lose Money

Why Go Public?

Why Go Public, Make an Initial Public Offering, or IPO, or Reverse Merger

What Types of Companies Should Go Public, Make an Initial Public Offering or IPO

How to Sell the Underwriter on Your Initial Public Offering or IPO

The SEC Process for Initial Public Offerings or IPO

Reverse mergers and other ways to get your stock trading in the public market

Problems with Venture Capital and Venture Funding

Marketing Stock -- Reverse Merger -- Public Offering

Need for Audited Financials When Doing an IPO or Reverse Merger to Go Public

Traps for the Unwary When Doing an Initial Public Offering, IPO, or Private Placement

Stops on Going Public, Making an Initial Public Offering, IPO, or Reverse Merger

The Rocket Ride -- Going from Start Up, through Seed Money, Venture Capital, IPO

SEC Rules and a Reverse Merger instead of an IPO

Public Shells or OTC Shells for a Reverse Merger

Problems with using a Public Shell or OTC Shell to Go Public with a Reverse Merger

New Venture Funding

See All the videos


An Alternative to Venture Capital Funding - Give Control to the Company

The Real Purpose of Corporate Finance

OTC Shells and Reverse Mergers -- The Aftermarket is the Key

Rules For Securities Offerings and Private Placements

Registration Instead of a Reverse Merger to Go Public

Venture Capital Rocket Ride

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