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


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

Inquire Now

OTC Shell for Sale

Reverse Merger Plus



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Reverse Merger Funding

We are now going to tell you the hard part – selling the stock. We believe that the more you see what you have to do to achieve your goals, the more you will come to realize the value of our services.

Typical Ways Reverse Merger Companies are Funded

There are several typical patterns in funding reverse mergers.

First, the company may take in private funding before or at the time of the merger.

Second, when the stock is trading after the merger, the company may seek private funds. The investors are more willing to buy privately because they have an exit strategy. This exit strategy generally entails selling into the public market under Rule 144.

Third, if the company has registered with the SEC, it may seek to register new securities with the SEC.

When private sales are made, they are made at a discount to the public market price. Further, most sophisticated private investors will not buy stock privately unless they see that the company has sufficient trading volume to support their sales when the time comes to sell. Companies with only a few shareholders, that do not have heavy trading volumes in their stock, generally find it difficult to find private buyers among professional or sophisticated investors.

Therefore, maximizing the price and trading volume of the stock is very important. This is usually done by using investor relations firms.

Short Sellers – Another Enemy

Please be advised that there are short sellers who prey on small companies that have negative cash flow. The short sellers know that companies with negative cash flow need to sell stock to survive. They know they can deprive the company of funds by beating the price down with aggressive selling and smear campaigns. If they are successful, the company will die or enter the land of the living dead – trading at prices in the cellar.

You Need a Plan

In order to be a successful reverse merger company, you need to know that you have a secure way to raise adequate funds and support the stock in the aftermarket.

Full Disclosure

I have always believed that full disclosure is the best way to create confidence in investors and encourage them to back you with their money.

Now, after the Chinese reverse mergers problems, there is more reason than ever to make the highest quality disclosure possible, no matter how you do your deal.


As you consider the wonderful possibilities from having your company fully funded to the point that you seem to have your own private ATM, and as you contemplate the complexities of the securities laws and the hidden predators in the financial markets, we trust that you will start to understand the importance of working with experienced and qualified advisors who can overwhelm your enemies and open the doors to the mysteries of Wall Street. We are here to assist you and we are always looking for the next big thing. Please take the opportunity to contact us. If we have too many other commitments to assist you now, we will be happy to advise you on where to seek assistance.

Securities Compliance for Reverse Mergers

Kindly note well – this is only a summary of the relevant securities laws. It is an attempt to give you what you need to know in a simple, readable format. You must consult qualified securities attorneys that are experienced in this niche of the securities laws. (This part gets into some technical securities issues. Depending on how much you want to dive in to these matters, you may want to skip this section.)

In most small reverse mergers, the parties overlook complying with the securities laws. Under the Securities Act of 1933, when you issue securities you must register, with some stated exceptions.

In a reverse merger, the public company is typically exchanging securities with the operating company. These securities must be registered or have an exemption.

If the operating company being acquired has a number of shareholders, both accredited and unaccredited, in a number of states, then registering or finding an exemption from registration can be difficult.

In this discussion please note, there can be two issues.

First, does the company issuing the stock, that is the public company, have an exemption entitling it to issue the stock. Second, once the public company stock is issued, to the operating company's shareholders, the public company's stock is restricted or free trading in the hands of the recipients, the operating company's shareholders.

Private Exemption

If the operating company being acquired has only a few shareholders, and they are all accredited, the public company can issue the stock privately. The public company stock these shareholders received will be restricted in the hand of the operating company shareholders as it was issued privately.

Reg D, Rule 506 can be used if all the operating company's shareholders are accredited and the company will not have to qualify under state law.

Reg D, Rule 504 can be used if the offering can qualify with the states where the operating company's shareholders live.

Form S-4

Typically, larger companies that can register the securities in a merger usually use Form S-4. This form must contain full disclosure not only about the company issuing its securities (the public company), but also full disclosure about the company being acquired (the operating company), and information on the surviving, combined entity. Because this is an SEC registration, the entities must have two years of audited financial statements. The filing will take time for the SEC to review.

Regulation A

Regulation A has been used, but it may have to be filed in some states where the operating shareholders reside. As a practical matter, some states do not favor Reg A offerings. Audited financials are not required. The filing will take time for the SEC to review.

Form CB

Little known, Form CB can be used if the the operating company is a foreign entity with less than 10% of the shareholders. However, the securities are restricted in the hands of the operating company shareholders.

Regulation S

Reg S can be used if all of the operating companies shareholders are foreign. The public company stock issued to the operating company shareholders is restricted.

There is More There

This is only a brief outline of some of the solutions that you can use to achieve your goals. We have spent decades studying these rules and their often obscure application and advising CEOs and CFOs on now to find that perfect solution. We look forward to assisting more fast growing companies. We believe that our decades of experience in the law combined with our decades of experience selling securities and trading in the public markets gives us very unique ways to approach these problems and assist growing companies.

Clck here for the next section, Revers Merger Investor Relations

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

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  • 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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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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