Going Public Strategies

Companies may go public by several different strategies, the most popular of which is the filing of a Registration Statement or by a reverse merger with a public shell. There is no categorically right or wrong way of going public as long as all regulatory guidelines are adhered to. The process of going public simply comes down to what method is most advantageous to the Company and its shareholders.

Going Public by Reverse Merger

This is still one of the most popular going public strategies.

In a reverse merger a private Company can go public by merging with an existing public Company or public shell. The private Company merges with the public Company that generally possesses no assets, liabilities or operations. However, the private company is provided with a turnkey free-trading shareholder base by the reporting company or trading shell company.

Reverse Mergers and Access to Public Markets

Post merger, the private company is now public and retains the majority of the public company’s stock. They then apply to FINRA for a new trading symbol and update any applicable SEC reporting requirements.

The single most attractive benefit to this particular going public strategy is the speed in which the newly public company can gain access to the public markets in order to raise capital.

Going Public by Registration Statement

Should the Company going public opt to avoid the reverse merger process for whatever reason, they may still file a Registration Statement with the SEC.

The Company details their business, any and all property or assets they possess or control, certain materials transaction whether they be pending or otherwise, legal proceedings that may impact the company or its officers, detailed identification of their officers and directors, their plans for the use of the offering proceeds, and their plan for distributing securities. Also included in the Registration Statement is a thorough analysis of the business itself as well as audited financial statements.

The Registration Statement is then submitted to the SEC via EDGAR to register the sale of the securities to be offered.

The foremost advantage to a private company going public by the filing of a Registration Statement with the SEC as opposed to a reverse merger with a public shell is that the Company need not be concerned about any unknown liabilities of the public shell company. In addition, by going public through the filing of a Registration Statement, the Company may also take advantage of the benefits of the Rule 144 exemption.