Reverse Takeover - Future Financing

Future Financing

The greater number of financing options available to publicly held companies is a primary reason to undergo a reverse takeover. These financing options include:

  • The issuance of additional stock in a secondary offering
  • An exercise of warrants, where stockholders have the right to purchase additional shares in a company at predetermined prices. When many shareholders with warrants exercise their option to purchase additional shares, the company receives an infusion of capital.
  • Other investors are more likely to invest in a company via a private offering of stock when a mechanism to sell their stock is in place should the company be successful.

In addition, the now-publicly held company obtains the benefits of public trading of its securities:

  • Increased liquidity of company stock
  • Possible higher company valuation
  • Greater access to capital markets
  • Ability to acquire other companies through stock transactions
  • Ability to use stock incentive plans to attract and retain employees

Read more about this topic:  Reverse Takeover

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