What are the differences between IPO and reverse merger to existing shell?

Question

Does the company and it's officers and directors have to go under close scrutiny in any case? Does the company have to disclose their names? Does the company has to have full transparency and disclose all of it's books and financial records?

Answer 1

The reverse merger into an existing shell is much faster, as your existing business essentially acquired a non-active company that has already completed all the SEC documents. Of course, you do pay a substantial premium to do the reverse merger into the shell.

A company I founded looked into this option, and we found that the typical shell would have cost us something like $350,000, and in addition, the people who founded the shell would keep roughly 7-10% of the stock in the newly-merged business.

Once you have acquired the shell, through a reverse merger, the business is still required to have full transparency, full disclosure of its books and financial records, etc., as it is you now are operating under SEC rules.

The major benefit is that the shell process is much faster, and there is less paperwork to do up front (someone else already did that for you.)

Note that when you do a reverse merger into the shell, you are SEC listed, but you haven't raised money through the IPO yet. You still have to do that, and that involves a lot of paperwork.

For what it's worth, my company chose to go the IPO route.