How Do You Make A 10 Base Exchange In Math Reverse Merger: Have They Taken the Reverse out of Reverse Merger?

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Reverse Merger: Have They Taken the Reverse out of Reverse Merger?

Are promoters and consultants destroying the reverse merger market? First let’s take a look at the reverse merge. In a reverse merger, an operating private company merges with a public company that has few or no assets and no known liabilities (the “shell”).

In some rare cases, the shell may have some cash left over to invest in the new venture. The public corporation is called a “shell” since all that exists of the original company is its corporate structure and shareholders.

The owners of private companies obtain the majority of the shares of the artificial corporations (typically 90-95%) through a new issue of shares for the private company or the assets.

The public corporation will usually change its name to the private company and elect a new board of directors who will appoint

the officers

The public corporation will usually have a shareholder base sufficient to

meet the requirement of 300 shareholders for eventual admission to listing

on the NASDAQ small-cap market or another market.

Now the problem or the devil is in the details:

Private company goes out to perform appropriate due diligence in a “shell”

after finding him clean and with no adverse past history to disqualify him,

go ahead complete the purchase.

After paying an astronomical price, say around $500,000.00-

at 700,000.00 for a bulletin board you get 90-95% of the shares.

Not only is the price extravagant, but it will also take the downside out of the reverse merger by insisting on a stipulation that it will not do a reverse split and reduce the number of shares outstanding. By reversing the stock, it reduces its 10%. What was the original intent of the reverse merger.

What a bargain $500,000.00 or more for 90% of nothing and better,

Let’s say the company has 300 shareholders and those 300 shareholders

collectively own 500,000 shares and in some cases more, and the shell has

30,000,000 million outstanding shares that shell owners get

keep 10% or 3,000,000 fee. I’m using the old math, not the new.

After the market maker is filed and the company is trading in the Otcc Bulletin

blackboard Your troubles begin, let’s say friends and acquaintances hear that your company is going public and they go out and buy some shares that make the price

say $3.50,

now the 300 shareholders who received their shares for pennies decide

they hit the lottery and start selling making it necessary for you to go out and buy shares on the open market.

Now back to basic math, assuming you want to keep the price at 3.50

so you go out and buy the stock. 500,000 x 3.50 = $1,750,000.00 forcing

that you go raid the child’s piggy bank if you don’t have spare change.

Now what happens to the 3,000,000 shares in the hands of the “shell” owner?

3,000,000 x 3.50 = $10,500,000.00, time to borrow from the wife.

And don’t forget about market makers and shrewd traders who are aware of upcoming stocks and drive your company’s stock price down.

Being the entrepreneurial individual that they are, they will take a short position on your company’s stock, after all, they have a right to make a living too.

Before jumping off the Empire State Building, make sure there’s a network

downstairs waiting for you

Don’t get me wrong, a reverse merger can be done if you have a consultant looking after you who is not part of the triumvirate (shell owner, securities attorney and consultant). And in some cases the same individual

is performing all three functions.

I wouldn’t recommend going out into the minefield without one

a mine detector, in some of my previous articles I suggested a way to check talking consultants and shell owners before they take you to

cleaners

Also note that there are alternative ways to go public, the reverse merge is just one of several options, so don’t jump in without looking, if you think

you must do a reverse merger insist on getting all the shares and not one less share.

In order to prepare you to deal with the complexities of the public realm, I would have to write a book, not an article, but I will continue to try and inform you through articles so that you are prepared if you decide to take the

dive in and go public.

There are honest and hard working consultants, in over 25 years in the business I have personally found two. But there must be more.

If you would like to learn about alternatives to a reverse merger, please contact me through our website: http://www.genesiscorporateadvisors.com, the alternatives may not be cheap, but they are cheaper than paying 500,000.00 dollars for 90% of nothing.

The answer to the title of this article is a resounding yes! They have taken the reverse of the reverse fusion.

josephquinones@genesiscorporateadvisors.com

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