Always Evolving and Adapting

Listing without IPO – Direct listing / De-SPAC / Reverse merger

IPOs are not the only way companies can complete their listings. We support companies seeking different listing routes, such as De-SPAC transactions, reverse mergers with OTC public shell companies, direct listings on domestic exchanges, or listings on OTC markets, leveraging our extensive experience.

SPAC Disposal Transaction

ANTHONY, LINDER & CACOMANOLIS, PLLC has represented both SPACs and target companies in SPAC dismantling transactions. Multiplan Corp. shareholder lawsuit (formerly Churchill Capital Corp III) and Delman v. We stay constantly informed about the ever-changing legal landscape surrounding the emerging SPAC industry, including the latest case law regarding fiduciary duties of SPAC sponsors, directors, and officers such as Gigacquisitions3, LLC, the impact of the Garfield v. Boxed, Inc. case on mass voting, and the SEC’s proposed broad regulatory changes. Our team is well-versed in both the business and legal aspects of SPAC demolition transactions and supports your team in moving forward with confidence.

For a detailed review of the proposed rule changes, please see my six-part blog [Part 1], [Part 2], [Part 3], [Part 4], [Part 5], and [Part 6].

Reverse Merger

For many years, we have been one of the most accomplished law firms in the reverse merger field, handling over 250 reverse merger cases over the past 22 years, representing both client companies and listed dummy companies. Most reverse merger deals involve publicly traded dummy companies on the over-the-counter market, but we also have extensive experience with reverse merger deals on the Nasdaq and NYSE/NYSE American. Importantly, over the years, the environment surrounding reverse mergers has changed dramatically.

Our company has extensive experience not only in preparing basic merger-related documents such as merger agreements and stock exchange agreements, but also in preparing SEC filings such as S-4, 14A proxy statements, 14C disclosures, 14F for board changes, and the closing of Super 8-K for board changes, but also in matters necessary for post-closing success. In today’s climate, it is extremely important to conduct thorough due diligence on public shell companies to ensure that future corporate activities such as name changes or share consolidations can pass the rigorous review process of FINRA (Financial Regulatory Authority). For more details on FINRA’s review of corporate activities, please see https://securities-law-blog.com/2023/05/09/changes-to-finras-corporate-action-notification-process/?hilite=finra.

For listed companies reporting on behalf of OTC Markets, we support smooth transitions and also assist in compliance with OTC Markets’ notification rules regarding changes in control. We ensure that new officers, directors, and controlling shareholders are not surprised that OTC Markets conducts background checks and conducts their own due diligence during the process, ensuring they meet expectations.

After the reverse merger with OTC Markets Shell, many companies are aiming to go public, and we are here to assist with that. For details on listings, including Nasdaq and NYSE seasoning rules, please see “Listings.”

Reverse merger with a publicly traded company

When conducting a reverse merger with a publicly traded company, the parties involved must understand and comply with specific rules of the exchange (Nasdaq or NYSE/NYSE American). When conducting a reverse merger with an exchange, the post-merger company must reapply for transactions with the exchange and meet stricter initial listing requirements rather than continuing listing requirements. In reality, even if exchange-listed companies are exploring or considering reverse merger transactions, they face many challenges. Therefore, meeting initial listing requirements often requires capital restructuring such as stock consolidation to raise trading prices, or capital increases aimed at increasing shares and market capitalization.

Furthermore, both Nasdaq and the New York Stock Exchange have shareholder voting rules related to reverse merger transactions, which include cases where acquisition of shares or assets by another company dilutes existing shareholders by more than 20%, or when there is a change in control of companies listed on the exchange.

Go straight to the stage

Another option for IPOs is the direct listing process. Despite evolving rules to attract more applicants, the process of direct listing on the Nasdaq or the New York Stock Exchange (NYSE/NYSE American) has so far been slow to spread. As of December 31, 2021, only 10 companies have been directly listed, and even fewer have continued since then. However, following rule changes that allow simultaneous fundraising and a recent U.S. Supreme Court ruling that has guided the highly regarded post-IPO shareholder lawsuit in Slack Technologies v. Pirani, this process is expected to become increasingly widespread in the future.

Direct listing on domestic stock exchanges is still not common, but listing on the over-the-counter market (except for reverse mergers) is the most common method. Traditionally, in the direct listing process, companies complete one or more private placements, then submit a registration statement to the SEC to register the shares purchased by individual investors. This is what a company goes public with. Companies can also complete the provision of Regulation A to create general shareholders.

When a company acquires general shareholders through a resale registration notice or a solicitation under Regulation A, it proceeds to apply for listing on the OTC market, collaborates with market makers to complete the 15c2-11 process, and can obtain the ticker symbol from FINRA. In September 2021, the 211 rules were fully revised, allowing OTC Markets to assist with the 211 review process as part of OTCQB or OTCQX listing applications for companies that meet the requirements.

For details on the direct listing process in the OTC market, please refer to https://securities-law-blog.com/2018/05/08/going-public-without-an-ipo/. For details on the new 15c2-11 rule, https://securities-law-blog.com/2020/09/22/the-sec-has-adopted-final-amendments-to-rule-15c2-11-major-change-for-otc-markets-companies/ and https://securities-law-blog.com/2021/08/17/sec-denies-expert-market-for-now/.

Consult with the securities attorneys at ANTHONY, LINDER & CACOMANOLIS, PLLC today

Our office supports your company’s listing. Technical inquiries are always welcome. For in-person or online consultations, please call 877-541-3263 or our contact page. I look forward to talking with you.

Areas of Practice

Securities law