REVERSE TAKEOVER AS A METHOD OF ENTERING THE US STOCK MARKET

Abstract

Abstract. This article describes two alternative ways of entering the foreign stock markets
– IPO and reverse merger method . This article contains a brief comparative analysis of the advantages
and disadvantages of both methods. The authors emphasize that the choice of method
often depends on the size of the market value of the firm. Traditional ІРО agreement is too costly,
time-consuming and risky way for companies in small and medium-sized businesses, prompting
their recent search for more accessible mechanisms to change the status of a company and to
find the access to funding sources.
To implement the method of reverse merger company picks up a shell company, already incorporated
in the United States as a public one, but subsequently ceased its core activities due
to various circumstances, selling its assets and liabilities by covering suspended its commercial
activities. Private firm thus transformed into a holding structure, headed by a U.S. public company
controlled by the owners of the enterprise, and operational branch (actually now) in the
home country. Due to the Status of the American public corporation, assets, operations and issues
of economic security acquire international character. At the same time, American and other
Western shareholders will not affect the management of the company and do not interfere in
matters of corporate control.
The method of reverse merger has several positive features and implications: the short time
for achievement prime goals of agreement between the participating companies, less stringent
financial requirements to the company, using the method of reverse merger, the relative cheapness
and flexibility. Foothold in the American market, earning the credit history and increase the
liquidity of its shares, the company receives virtually unlimited mechanism to attract foreign investment
to improve its operational and financial performance.
Key words: initial public offering (IPO), American Depository Receipts (ADRs), the Stock
Exchange, the company shell, reverse merger.