Reverse mergers — New rules could mean new obstacles
Abstract: A reverse merger often is considered a quicker and cheaper way for a company to go public, but new rules could make these transactions more difficult. The SEC recently applied the brakes to companies pursuing reverse mergers as a backdoor method of getting listed on major public stock exchanges. Although these rules won’t necessarily affect all plans, this article examines the potential obstacles. It explains what’s involved in a reverse merger, how the new rules promote greater transparency, and potential implications for companies and financial markets. A sidebar describes the three major steps involved in a reverse merger transaction.