A few thoughts about where we are now that some of the
dust has settled following the passage of "seasoning" requirements to uplist to
major exchanges after a reverse merger with a reporting shell. If you are
thinking about a strategy to deal with the changes, get in touch! But here are
some real big picture thoughts. This is not the end of companies going public
through means other than IPOs. We simply have to adjust our thinking to the new
regime. For example:
1. Many companies complete reverse mergers with no intention
of uplisting to a major exchange for a few years. Some are not ready in their
life cycle, or want to "get used to" being a public company without all the
additional governance and other restrictions of a major exchange. Seasoning
will not affect these companies since that is exactly what they seek to do.
2. Larger companies that are either a bit too small for
an IPO or otherwise prefer the benefits and greater certainty of a reverse
merger also should be fine so long as they are comfortable that when they seek
to uplist they should be able to attract a $40 million public offering from an
underwriting firm. These are also exempt from seasoning.
3. Some companies will seek a good sized public financing
onto the OTC Bulletin Board while seasoning. Others may see what will portend
in the new BX Venture Exchange, or even on the BATS Exchange, neither of which
currently have any seasoning restrictions. Take a look at these gang.
4. More and more companies are talking to us about a
self-filing. Here you take your own company public through a Form 10 or S-1
filing which may follow or be concurrent with a financing. The key there is
being able to finance yourself, or not need financing, during the time it will
take to get the SEC filing approved, which could be a number of months longer
than a reverse merger. But in many situations a shell and reverse
merger simply are not necessary.
5. The fight is not over. The attendees at the SEC's
annual forum on small business capital formation approved a recommendation to
the SEC to exempt from seasoning any company whose key disclosure in an SEC
filing was reviewed and fully approved by the SEC. This would help OTC
Bulletin Board SPACs that were (in a surprise to all) not exempted from
seasoning like SPACs traded on higher exchanges were. This would also help any
reverse merger company whose "super" Form 8-K is reviewed by the staff (all of
them have been recently). Will anything come of this? Don't know but in the
SPAC world at least some major players like Citigroup, Deutsche Bank and others
are very active and do not wish to lose this part of their livelihood.
So while the deck chairs (think on a modern cruise
ship rather than the more common "Titanic" reference) are shifting, as they do
each time the SEC acts in this area, there's still quite a bit of ocean sun to
enjoy and share.
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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