I find a public shell?
are sometimes advertised for sale in financial newspapers and on
is important in the public shell?
you want to know that the shell is a clean public
shell -- without liabilities, hidden costs, threatened lawsuits,
undisclosed warrants or stock options that could come to haunt you
after you put your company in the shell. You must do good due
diligence on the shell.
you want to know all about the capitalization of the company, its
corporate charter, by-laws, and other legal matters.
do I need to have to do the merger?
will want to have your company in shape to go public. You should
review all your corporate documents and make any changes you want
to make before you do the merger. You will also need to have
accounting statements. We can give you a checklist of everything
you need. Ask for it -- mailto:firstname.lastname@example.org
The SEC has new rules governing shell deals. See SEC Release No.
33-8587. To find out what this means to you, contact us.
do I know what my company's stock will trade for after the merger?
will know for certain until the deal is done, but we can give you
an opinion for a small fee.
is the SEC's position on reverse mergers?
SEC has issued a warning on reverse mergers to investors:
SEC is considering tightening rules on reverse mergers due to
recent Chinese-based reverse merger frauds, see SEC
weighs new policies on foreign reverse mergers
is wrong with Chinese reverse mergers?
the last few years, many Chinese companies did reverse mergers
with public shells in the U.S.
the last year, it has been discovered that many of the Chinese
companies took advantage of the lax due diligence process and lack
of effective accounting oversight in China to commit fraud.
Apparently Chinese business ethics are not up to U.S.
sellers have capitalized on this situation by selling these stocks
and engaging in negative public relations activities.
SEC has taken this opportunity to review the regulation of all
can expect reverse mergers to be under a cloud as a result.
reverse merger companies good investments?
not. At most, they are speculative companies, and while some of
them will be profitable speculations, none of them are investment
are only for sophisticated investors who understand what they are
doing and can afford the risk.
a sophisticated few, there have been large profits to be made in
buying shell stocks before a merger, but this is very, very
speculative and again only for the sophisticated speculator who
can understand and afford the risk.
actual fact, most reverse merger companies wind up as losing
investments if you compare their post-merger prices right after
the merger with the prices of these stocks years later.
are many reasons for this: inexperienced managements, weak
business plans, over-promoted stocks, and plain old fraud.
is the best procedure for my company?
exact path for your company depends on your individual situation.
Generally the important factors are the goals and purposes that
are important to you and your company, the condition of the
business of your company, the amount you can afford to pay for a
shell, if you can get audited financial statements, the
attractiveness of your company to investors, the number of
shareholders you have now, but there are many other factors that
may be involved.
long will it take, what will it cost?
will vary according to the path you take. In an extreme case, it
could take months to get audited financial statements, get through
the SEC, do due diligence and negotiate acquisition of a shell,
and many of the other factors. On the other hand, you can merge
with a trading Pink Sheet shell in a matter of days.
cost of shells has been declining from the effect of the recent
Chinese reverse merger scandals. You may buy a Pink Sheet shell
for $120,000 or less, and an SEC reporting OTC BB shell for
$400,000 or less.
I buy a non-trading shell?
is not recommended. You will have to file a Form
211 with FINRA to get the shell trading. This may take some
time and effort.
do shell prices vary so much?
prices vary according to whether the shell is a Pink Sheet or OTC
BB shell, if the shell has any assets in it, the amount of
shareholders and the trading volume in the shell now, and many
other factors. I have seen a shell offered to a company for no
cash consideration because the control shareholder of the shell
knew that his stock would be very valuable after the merger. He
knew this because of the experience and reputation of the
promoters of the operating company.
much of the shell can I buy?
do not want to buy 100% of the shell because if you do it is not
longer a public company.
amount of stock left in the hands of the shell shareholders will
be negotiated along with the cash consideration. The more cash
that is paid, the less of the stock will be left with the original
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