1. A Limited Operating History Does Not Prevent a Company from Going Public by Reverse Merger
Whereas it is essential for Companies to possess a substantial operational history in order to launch an effective IPO, going public by reverse merger is designed to accommodate start-ups and high-growth Companies with minimal previous operations and earnings.
2. Reverse Mergers are Fast
A private Company going public by reverse merger with a public shell can do so in a matter of weeks as long as they are organized, properly advised, and have access to a clean public shell.
3. Potentially Less Expensive
Depending on the cost of the public shell required for the reverse merger, the out-of-pocket expense for the private Company going public can be less than initiating an IPO.
4. Dilution is Reduced
In an IPO there is a greater possibility that the Company’s shares will experience dilution. This detriment is greatly reduced in a reverse merger.
5. Underwriter Requirements are Reduced
The participation of an underwriter is not essential to the reverse merger process. In an IPO it is generally necessary to have the backing of an investment bank to act as lead underwriter. This factor is eliminated when conducting a reverse merger with a public shell Company.