By David Feldman at 29 May, 2009, 4:09 pm
I just started writing a new series on Slate.com’s small business site. The series is entitled “Are You an Entrepreneur” and the first installment can be found at http://bizbox.slate.com/blog/2009/05/are_you_an_entrepreneur.php. Take a look! Also in there is my other just completed series entitled, “The Entrepreneur’s Lament.”
David N. Feldman is a Partner in Richardson & Patel LLP. His practice focuses on corporate and securities matters and general representation of public and private companies, investment banks, private equity firms and high net worth individuals.
David is considered one of the country's leading experts on reverse mergers, in which a private company becomes publicly traded through a merger with a publicly held "shell" company. His book on the subject, Reverse Mergers and Other Alternatives to Traditional IPOs, Second Edition (Bloomberg Press, 2009) was originally published in 2006.
I have a question about publicly traded shells.
A highly informative reverse merger website advised that it is best to have your non affiliate shareholders purchase as much free trading stock from the publicly traded shell’s non affiliate shareholders during a purchase of the publicly traded shell.
Is it possible to structure a transaction so that some of the existing non-affiliate shareholders sell free trading stock (they are free trading due to a full registration process) to our non affiliate shareholders?
Jack, if the non-affiliate shell shareholders truly have free-trading shares, they can trade them as they wish subject to applicable securities laws. If you care about developing trading in the first few months after a merger, some of those shares can be sold to your holders, but of course there has to be consideration paid, etc. Or just wait and register as many of your holders’ shares as possible right after the transaction. But of course check with your counsel as to what makes the most sense.