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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