Drawbacks of a Reverse Merger - reverse mergers, public shells, going public, private placements, public offerings, ipos

The Drawbacks of a Reverse Merger

Reverse Mergers aren't for everyone, however. There are several drawbacks to this financing technique. Among the disadvantages:

requirement for audited financial statements;
required publication of corporate information;
required filings of periodic and episodic reports with the Securities and Exchange Commission;
increased rules and regulations governing management, corporate activities and shareholder relations.

Shop Talk: The controlling shareholders of a shell corporation will most likely insist on owning a small stake in the deal going forward. This "trailing interest" is simply a cost of doing business.