Solid Second Quarter for RM

The Reverse Merger Report is a great source of data and industry information, and I urge you all to subscribe at www.dealflowmedia.com. Their second quarter review has many of us feeling good about RM, despite a few roadblocks making some deals a bit harder in this market and regulatory environment.

Second quarter deal flow was consistent with the second quarter last year, which was a great year. Forty-one reverse mergers were completed in the second quarter, this against only 13 IPOs. And as mentioned in an earlier post, this was the first time since 1978 that not a single venture-backed company completed an IPO.

Some had predicted a much stronger quarter because of the virtually non-existent IPO market, but instead RM held steady, which in this market I think is pretty amazing in itself.

China stayed strong representing 40% of closed deals. Investment banks are reporting interest from funds that previously weren’t interested in the APO model because of the high-flying Chinese company stocks.

However, there are fewer RM transactions with contemporaneous financings, and those financings are a bit smaller than previous quarters. Some funds are facing redemptions so doing fewer deals. And a number of Chinese companies do not seek immediate financing when they complete a reverse merger in the US. Some also feel that the Rule 144 changes, which treated former shells more negatively than other public companies, are causing some to rethink their approach to going public, or going public at all.

All that said, while many on Wall Street are forced to adjust to a limo ride to the Hamptons rather than the helicopter, RM is holding up just fine thanks.

Leave a comment