A few years ago, it seemed like almost every company went public with an IPO to get money from investors. Now, since smaller companies can't use this route, entrepreneurs, angel investors, and employees are looking more and more at the possibility of a reverse merger with a trading shell on the OTC Bulletin Board, the Pink Sheets, or Form 10.
Through the reverse merger, your private company merges into a "shell," which is a publicly traded company, and takes control. This gives you listed stock that you can use as a way to get money.
This whole process might seem sketchy, but it's not. Many well-known companies have gone public through a reverse merger, including Warren Buffett's Berkshire Hathaway, Turner Broadcasting System, Occidental Petroleum, Blockbuster Entertainment, and even American Idol (www.americanidol.com)
Peter Klamka, an investor from Ann Arbor, Michigan who has stock in the fast-growing solar energy company Girasolar Inc (OTC: GRSR), said that he thinks "At the moment, a Form 10 shell is the best way for most private companies to go public. It can be the least expensive way to do things, and it can help you avoid problems that most trading shells have."
A Form 10 blank check shell company is a good way for private companies to get into the public markets. It can be bought for between $50,000 and $100,000. But the Worm/Wulff Letters say that blank check shares can't be traded right away after a reverse merger between a Form 10-SB shell and a private company, no matter how long the shell has been reporting as a public company.
The other option is to buy a shell company that is already trading and is listed on the Pink Sheets or OTCBB. This is a much more expensive option, costing anywhere from $150,000 to $1,000,000 to buy.
The best thing about using a Form 10 shell company to go public is that the company that buys the shell will keep most or all of the stock in the shell. Overall, the process takes longer, but in the end, both shareholders and the company get a much better deal.
