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Advantages & Disadvantages of Going Public Through a Reverse Merger [2010-10-12]
 
Advantages of Going Public Through a Reverse Merger

 

 

Increased Valuation: Typically publicly traded companies enjoy substantially higher valuations than private companies.
 
Capital Formation: Raising capital is usually easier because of the added liquidity for the investors, and it often takes less time and expense to complete an offering.
 
Acquisitions: Making acquisitions with public stock is often easier and less expensive.
 

Incentives: Stock options or stock incentives can be useful in attracting   management and retaining valuable employees.

 

Financial Planning: Public company stock is often easier to use in estate planning for   the principals.  Public stock can provide a long term exit strategy for the   founders.
 
Reduced Costs: The costs are significantly less than the costs required for an initial   public offering.
 
Reduced Time: The time frame requisite to securing public listing is considerably less   than that for an IPO.
 
Reduced Risk: Additional risk is involved in an IPO in that the IPO may be   withdrawn due to an unstable market condition even after most of   the up front costs have been expended.
 
Reduced Management Time: Traditional IPOs generally require greater   attention from senior management. 
 
Reduced Business Requirements: While an IPO requires a relatively long   and stable earnings history, the lack of an earnings history does   not normally keep a privately held company from completing a   reverse merger.
 
Reduced Dilution: There is less dilution of ownership control, compared to a   traditional IPO.
 
Reduced Underwriter Requirements:  No underwriter is needed: (a significant factor   to consider given the difficulty companies face in attracting an investment   banking firm to commit to an offering.)
 
 
Disadvantages of being Public
 
Less Confidentiality – complete financial disclosure is required to become publicly   held.
 
More Public Reporting – Reporting expense is greater because of the need for full   disclosure.
 
Ownership Dilution – Owners give up some equity percent.
 
Greater Time Involvement – Management must devote additional time to public company operations.
 
Greater Liability – More company visibility brings a higher level of liability exposure.
 
Increased Expense – Higher costs of regulatory compliance for audit, legal and   investor relations.
 
 

G. Michael Bennett, CEO

     AGBA-Global May, 2009

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