Despite, as The Reverse Merger Report put it,
"continued attacks from short sellers, mounting fraud allegations, and numerous
ongoing investigations of Chinese companies by the Securities and Exchange
Commission," we completed the first quarter of 2011 strong in terms of number
of reverse merger deals done.
The RMR reports that 58 reverse mergers were
consummated in the first quarter, which basically matches the five year average
of 56. Interestingly, though, the number of deals not including a contemporaneous
financing has gone way down. This while the capital markets have strengthened
well, so it's a bit of a head-scratcher. Companies we are talking to say they'd
rather get public first then go seek financing, believing, probably correctly,
that the valuation they will get after they are public will be higher than at
the time of going public. So that may be the reason.
China, amazingly, continues to represent about 1/3 of all
deals, with 21 Chinese reverse mergers getting done in the first quarter. But
almost none of them included a financing.
Are people writing off reverse mergers? Hope not, but
clearly, as one quote in the article agreed, we are facing a setback because of
the problems in China. I agree with another quote, noting that the end result
after China shakes out will be smarter, stronger companies utilizing IPO
alternatives and understanding what they are getting into.
For additional insights on reverse mergers,
SPACs, other alternatives to traditional initial public offerings, the small
and microcap markets and the economy, visit the Reverse Merger and
SPAC Blog by David N. Feldman, Esq., Partner of Richardson &
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