Talk:Reverse takeover

Intense cleanup

Over the course of fifteen edits, I think I've got this article being a considerably better read now. I also learned a lot about reverse takeovers in the process. SchuminWeb (Talk) 02:20, 3 December 2005 (UTC)

It looks like much progress has been made on this article. Great work everyone. So far as references,... this is difficult to easily do as there are no textbooks or college courses about this stuff. Those of us who do it regularly and are "inside" learned by experience and training, and we had to scrap and claw our way into it, making mistakes for every bit we've learned. But if anyone can add some references to this thing it would be great. I know without BD approval, its hard to put anything in writing let alone sign your name to it. So thank you everyone for a great article. (Insightfullysaid (talk) 21:17, 18 March 2008 (UTC))

Passage contradicts another article

Regarding this: The New York Stock Exchange was acquired by Archipelago Holdings to form NYSE Group, with the goal of taking the former, a mutual company, public.

This contradicts the NYSE Group article, which states that the NYSE acquired Archipelago Holdings. Either this one needs to be fixed, or the NYSE Group article needs fixing. SchuminWeb (Talk) 04:05, 25 May 2006 (UTC)

It's a matter of semantics. The NYSE proposed the deal and ended up with control, but technically, Archipelago did the acquiring. This is pretty common. The NYSE Group article refers to who wound up with management control, while the Reverse Takeover article refers to which company was the acquisition vehicle. Archipelago basically "paid" less in their (listed) shares than FMV for the NYSE shares (which were not listed) to reflect the fact that NYSE was the acquirer. The Aerospatiale/Matra deal was the same way, though I think there was no premium difference; Aerospatiale still wound up in charge even though they were "acquired" by Matra. —Joseph/N328KF (Talk) 04:13, 25 May 2006 (UTC)

I played with NYSE Group a little bit to indicate that it was a reverse takeover, and thus hopefully eliminating some of the contradiction. I think my work on it still needs more work, though, but it's a start. SchuminWeb (Talk) 04:38, 25 May 2006 (UTC)

SBC

Would SBC taking over AT&T count as a reverse takeover? Jigen III 14:14, 2 June 2006 (UTC)

I don't believe it would. Southwestern Bell was spun out of AT&T during the breakup, grew and matured as an independent company for some time, and then ultimately acquired the company from which it was originally spun out. I also believe both companies were already public. SchuminWeb (Talk) 14:20, 2 June 2006 (UTC)

I don't believe that it does either because in a traditional reverse takeover situation the acquirer is usually a shell, with little or no business activity. Obviously, SBC had a ton of business activity and actually had a ton more than the old AT&T. SBC truly acquired AT&T for AT&T's name.--Getaway 14:31, 31 January 2007 (UTC)

Contradict

I believe the following two paragraphs contradict each other. I'm not sure which one is right.. —Cliffb 07:36, 19 August 2006 (UTC)

Additionally, many shell companies carry forward what is known as a tax-loss. This means that a loss incurred in previous years can be applied to income in future years. This shelters future income from income taxes. Since most active public companies become dormant public companies after a string of losses, or at least one large one, it is more likely that a shell company will offer this tax shelter.

It is highly unusual to preserve any benefit from the tax loss carry forward in a shell company. The tsx regs. normally reduce the loss carry forward by the percentage of the change in control. In a well structured reverse merger the private company should end up with 95% or more of the stock after the mergr, thus reducing the tax loss carry forward by this amount for greater.

US tax law

Normally, U.S. tax law dramatically reduces the available of a loss carryforward if a change in control has occurred. I believe that when a "ownership change"(as defined in IRC Section 382(g)) is deemed to have occurred, Section 382 of the Internal Revenue Code reduces the availability of a loss carryforward to an amount equal to the product of the value of the old loss corporation and the applicable federal long-term tax-exempt rate. 12.40.239.4 16:20, 15 September 2006 (UTC)

That's not true. You can apply tax losses to different items on the balance sheet. Tax loss carry-forward is one of the great benefits of a RTO.--Getaway 14:33, 31 January 2007 (UTC)

In this case, the contradiction remains, because the article is saying that it is highly unusual to preserve the tax benefit. Can anyone clarify this point? Merry07 22:10, 20 March 2007 (UTC)

If you really know what you are doing, you can assume previous losses by avoiding a technical "ownership change" when you take the shell... err, I mean "entity" since that's what we're supposed to call them now. I've done it. (Insightfullysaid (talk) 21:22, 18 March 2008 (UTC))

Citigroup/Travelers

The creation of Citigroup started originally as a reverse takeover. Long before the series of acquisitions of EF Hutton, Shearson Lehman Brothers (Citi spun off Lehman Brothers later and kept Shearson), Smith Barney (the name of the retail stockbrokerage), Salomon Brothers (hence the name of Citigroup's investment bank as Salomon Smith Barney), Primerica, and Travelers. Sandy Weill acquired a broken down old shell called Commercial Credit--the reverse merger. That was the original reverse merger out of which Citigroup grew. In the end, Travelers and Citibank merged--supposedly as equals--and created Citigroup.--Getaway 14:48, 31 January 2007 (UTC)

Reference

For a conventional IPO, it can cost as much as $200,000 just to release a preliminary prospectus. A reverse merger, however, can be done for $95,000 to $150,000.

This needs a reference - IPOs can cost millions. Also, what evidence is there that a reverse takeover can be done for $150,000 max (as the quote seems to suggest)?

I did a Reverse Takeover with $25k down and financed $175k for a total of $200. $95 sounds a little too cheap if you ask me... maybe a year ago someone could have done that but not anymore. Not unless you want a crappy shell. I agree that IPO's can cost millions. Also, most IPO's are OTC BB at a minimum, and $95k can at best land you an inactive pink sheet or a grey. $175 could get you a decent pink, cash & carry. Insightfullysaid 02:51, 29 May 2007 (UTC)Insightfullysaid

WARNING: Non arms-length bias

STOCK JOCKEYS: you know who you are. This is not your infomercial. Keep it objective or else we editors will pull the plug on your free advertising. Wikipedia is an encyclopedia, not an advertisement! This article might as well say, "10 reasons why you should go public via RTO using my services!" NO SOLICITING THE SALE OF SECURITES! Its illegal and does NOT belong in the fine pages of Wikipedia. You are being watched, and your IP address is tracked. Don't think the SEC is dumb. Watch it! Anything you post here, you'd BETTER be prepared to defend when the SEC asks about it. In fact, wiki does not let you post about yourself, so lay low and quit pumping your own business. Insightfullysaid 03:23, 29 May 2007 (UTC)

Other editors: Ignore this, it doesn't apply to you.Insightfullysaid 03:25, 29 May 2007 (UTC)

We shouldn't be giving ANYONE free advertising via Wikipedia. SchuminWeb (Talk) 09:53, 29 May 2007 (UTC)

Wow - this is an incredibly non-NPOV article. As a corporate lawyer who has worked on hundreds of public and private securities offerings over the years, I have yet to see a reverse merger that makes one dollar for private company shareholders. I am not saying this does not happen, but it is rare. Clearly, this article was written by the same boiler room crew which keeps pinging me with those obnoxious pump and dump spam e-mails. I have tried to give the potential dupes reading this a bit of a taste of reality in the Negative discussion, but I can only go so far. Ndriley97 (talk) 00:02, 10 June 2008 (UTC)

Then fix it and make it right. You've got a username, and so it's time to put some more miles on it. SchuminWeb (Talk) 03:56, 10 June 2008 (UTC)

I did, thanks. Added a paragraph.Ndriley97 (talk) 00:48, 13 June 2008 (UTC)

I have a question regarding this - College Tonight said that they got $1.6M from RM...Is that even possible? You just did a RM and you received more capital? (as a pink sheet?) I am confused... TheAsianGURU (talk) 09:00, 21 September 2008 (UTC)

Need a bit re-write, maybe?

Please let me know if I am wrong, but isn't "Reverse Merger" technically the Shell company "buying" the private company and then give the shareholders and management of the private company majority control of the newly formed public company (and then change its name to match the 'original private company's name' etc)? If I got that right, shouldn't it be in the entry? Because right now, it sounds like it's the other way round. I don't know much about this issue, that's why I am asking. Thank you. TheAsianGURU (talk) 08:52, 21 September 2008 (UTC)

Why am I confused on this detail?

Quote: "A major disadvantage of going public via a reverse merger is that such transactions only introduce liquidity to a previously private stock if there is bona fide public interest in the company."

Um, would the disadvantage not be the same if there was no "bona fide public interest in the company" who tried to do an IPO instead of a RTO? What liquidity would be provided via a [presumably failed?] IPO for a company with no "bona fide public interest in the company"? Or, would the "pump-and-dump" (pardon my language - I don't know how else to say it) mechanism of the IPO-arranging firm be generating possibly-unwarranted public interest? Or something else? Jornadigan (talk) 17:20, 2 December 2009 (UTC)

US Specific content

This is a globally relevant subject (I understand this concept exists in at least Australia & the UK as well), but this article contains a number of paragraphs of infomation which is relevant only to the USA, but is not marked as so. I'm not an expert in this, so I'm not really keen to attack splitting it out for fear that I may mess the content up, but it seems clear that quotes such as "The disclosure is filed on Form 8-K" are not likely to be correct outside the US! Would someone who is confident in this subject area be happy to create a "USA Specific" (or similar) section and move the non-generic content to there please? JohnGH (talk) 14:31, 23 September 2011 (UTC)

I'll take a whack at it, but could you please provide specific sections where this problem exists? Would definitely help to get some specificity. SchuminWeb (Talk) 02:17, 24 September 2011 (UTC)

Chinese RTOs in the US?

It's odd that this topic was not addressed on this page, given the immense amount of media foment we've seen about it (at least in the financial press in NY) over the last couple of years. Any will to work on that?

So what's the term for...

So if, as defined in this article, a reverse takeover is restricted to the situation where a non-operating but public company (i.e., a SPACblank-check company) takes over a non-public company as a way of reducing IPO transaction costs, then what do you call the situation in which one public company engineers its purchase by another public company, with the acquired company's management taking control of the whole entity. The formation of Biogen Idec in 2003 was an example, and I'm looking for the correct terminology to describe the transaction. (At the time, it was described to the press as a "merger of equals", but by both tax and accounting rules it was a purchase of Biogen by IDEC, as can be seen from the merger agreement and subsequent financial statements, despite the fact that the Biogen management remained in charge and the corporate headquarters "moved" from San Diego to Cambridge.) 121a0012 (talk) 01:53, 3 September 2012 (UTC)

That's what I'm wondering, because that is my understanding of the term, and doesn't seem adequately covered here. This article seems entirely based around the idea of a private company buying a near-defunct publicly traded company as a way to go public while being less rigorous than the rules for IPOs. But I've always understood it to mean that larger company A merges with company B, and keeps its (usually more established) name and much of its assets and lines of business, but company B's shareholders wind up with the majority of the combined company's ownership, and company B's management takes control. The classic examples here are America West Airlines de facto taking over US Airways, and then later, that US Airways (which was still being run by the ex-America West management by that point) merging with American Airlines, which inherited the US Airways management. That's inadequately covered here. oknazevad (talk) 17:47, 27 December 2022 (UTC)

Tandy Buys Radio Shack

Would the time Tandy bought Radio Shack and changed their name to Radio Shack qualify as an example, or is that something different? — Preceding unsigned comment added by 2001:56A:F330:5A00:2C09:CD95:C380:3C3 (talk) 02:14, 8 May 2018 (UTC)