Nearly half of the companies trading on a small cap exchange went public by way of a reverse merger.

Most private companies that go public by way of a reverse merger experience higher evaluations once public.

Most private companies have an easier time raising capital after going public due to shareholder liquidity and reporting requirements.

Whether your company is a fledgling start up or a well established business with substantial revenues, by taking your company public through a reverse merger you will be among an elite group of dynamic and hard working entrepreneurs who have made the process work. Examples include;

Armand Hammer, world-renowned oil magnate and industrialist, is generally credited with having invented the “Reverse Merger”. In the 1950s, Hammer invested in a shell company into which he merged multi decade winner Occidental Petroleum.

In 1970, Ted Turner acquired control of Rice Broadcasting (WJRJ-TV) in Atlanta, Georgia. Eventually this company became Turner Broadcasting and was acquired by Time/Warner and later merged with America Online. Ted Turner is now one of the wealthiest men in the world.

Acclaim Entertainment (AKLM) merged into non-operating Tele-Communications in 1994.

In 1996, Muriel Siebert, the first woman to purchase a seat on the New York Stock Exchange (NYSE), reverse merged her discount brokerage house, Muriel Siebert & Co., into J. Michaels, Inc., a defunct, but publicly traded Brooklyn furniture company. The stock has since traded over $70 a share.

In 1999, Tony Robbins, best selling author of “Awakening the Giant Within”, conducted a reverse merger with GHS, Inc. whose stock soared from $0.75 to over $12 a share.

Other well known companies that can trace their roots back to a successful reverse merger with a public shell include Blockbuster Entertainment, Inc., Occidental Petroleum Corporation, Waste Management, Inc., and RadioShack Corporation.

“The Pink Sheets and the OTCBB are competing quotation services for OTC securities. The Pink Sheets is a privately owned company, while NASDAQ operates the OTCBB.”

I thought it was important to point this out because affiliating the Pink Sheets with the NASDAQ adds a level of credibility and trust that is not warranted.

Also, reverse mergers are actually an incredibly successful method of taking companies public. There are hundreds of great examples of good companies taking over shells via reverse merger. Many Chinese companies with millions in revenue and profit are going public on the OTCBB via reverse merger.

Best,
George

No, I think having symbols associated with religions in a Co. logo is unwise.

As per my previous comments, your generalities on RTO’s are ridiculous. I suppose you’re Mark’s buddy backing him up on his ridiculous comments.

If you have some experience in the financial markets please do tell.

uh… yes.

First, their home page. Jesus God. Cheesy line drawings of college kids. The third picture actually shows a bunch of frat boys getting drunk (one is holding what looks like a beer can). Is that what they would have us believe college life is about?

My other comment is that in all of the drawings, every one of the college students appears to be white. Don’t blacks, Asians, and other races go to college these days.

Thirdly, the strategy of doing a “reverse merger” (becoming a subsidiary of a badly-run public “shell” corporation) is one of the oldest tricks in the book to get quick liquidity, and you’re right, it usually ends up failing.

It is a really, really bad strategy in this case, because you have a joke of a website being absorbed into a flop of a public company which isn’t even remotely involved in the commercial internet.

Perhaps questioning your employment is strong for one post, however you have a habit of adding your uninformed and often very inexperienced opinions into posts where they are not at all necessary.

Your post was just fine, until you mention a statement such as “…and it rarely ends well…”

Until that little nugget, the piece didnt require any further background work. Once it was in though, you should have provided some basis for that cheap shot.

As for chilling out, no problem once you realize those types of comments don’t need to be in a piece. That’s not why we all come here.

You know … and I am not trying to slam you so please do not take it in such a way … the press is very irresponsible in how most news are reported. I, stop reading or watching news because it is all the same insensitive, irresponsible, ultra filtered, one side sort of thing over and over. There is zero objectivity. So, even though I think it may be poor form to question somebody’s employment, I do think that research needs to be complete and through; especially on a site like TechCrunch.

So, to Coffee Man’s point, “This is a common way for startups to get liquidity fast, and it rarely ends well”, is a very strong statement. As I mention, I know of one, Terramark, did a reverse IPO and the company is growing. In any case … I do feel there should be more objectivity in reporting and some comparison for education sake would have been a good idea.

Now … how do I get my news? Well … I read them on different web sites with different orientations and in different languages and I try to extract the actual news from distilling content from them. Yeah … it is a hard way to go about it. But I try very hard to not be a “consumer”.

#6, 24: Yea, I agree – College Tonight hardly competes with Facebook right now, but they are a competitor as far as their intent goes.

August 11, 2005 Iron Capital Corp a company listed on the TSX-V in Canada did an RTO of Kaboose. Now listed on the Toronto stock exchange, Kaboose has about 94M shares outstanding and closed today’s trading at $2.73 CDN. Symbol is KAB on the TSX.

I thought TC covered the company a while ago, but I couldn’t find any info here. Perhaps it was Business 2.0 although I’d have to go back over my copies for the last year or two.

Former AOL and Microsoft executive Craig Wallace is President and COO. You can visit their web site for more information and their news releases back to 2005 where the whole RTO process is explained.

So back to the original post by Mark, I think this well illustrates that by writing a story about the management of College Tonight and their intent with the RTO, that it would have provided more value to the readers of this blog, than just blindly slamming this method of raising capital – which is just content flaming as far as I am concerned.

Got my Toronto companies mixed up.

JumpTV used the same RTO strategy to get a public listing and is the company now run by Jordon Banks the former head of ebay Canada.
It was this company that said they made some mistakes.

JTV is the symbol on the Toronto Stock Exchange.

Still looking for the name of the kids site that did this.

Will have three examples of legit companies when I do.

This could have been a good opportunity for Mark to discuss the various ways companies are out there raising money but instead he took the easy road and slammed the method.

Checking on a tech company (the name is not coming to me right now) going through the TC company index. The company is out of Toronto in the kids sector. They did an RTO on the TSX Venture Exchange, and a private placement to satisfy the market requirements for a tech company. They were in business for a number of years before doing this, and wanted to use the money to acquire other businesses. With 12-18 months they graduated to the full Toronto board (the Venture is for juniors).

The company president just stepped down and the former head of AOL Canada I think is running the company. The former pres did admit in a recent news release that he felt he made some mistakes along the way, but they have a solid plan for the future with solid management at the helm. Which is exactly my point.

For another industry success story Ultra Petroleum (UPL) on the Amex is a company that started this very way and now has something like a $25 Billion market cap. This one is personal because I’ve known the founders of this company now for about 10 years.

Will get back to you (with links) when I find the name of this company in tech in Toronto.

Still hyperbole. You’ve given no examples and no good argument, just another cliche on the bad end of an RTO. My point is still waiting for knowledgeable debate.

For those well-intentioned companies, this is a legitimate way to raise capital to fund and build a company. Whether you’re selling equity to a vc, or selling equity to the public markets, you’re still selling equity. The difference is who is taking the risk. Equity is still being sold to an investor.

Going back to the myspace deal, the company had little or no revenue, and when sold for $580 Million – reportedly the founders had about 10% equity left in the company. If that is the case 90% was sold to VC’s who brought up the value and then sold the company off. What seemed like an overpriced deal at the time, now seems like a good buy based on the market value myspace would generate if sold today.

Try and tell me if the founders had gone the same RTO route and diluted their positions to the 10% level publicly instead of selling off to the vc’s that it would not be where it is today. The key here was the management.

Like I said it all comes down to the people holding majority interest and their intentions for building a company.

Try and comment on the validity of the people doing the deal and less on being stereotypical. Are all black people the same, asians, southern folk, are men smarter than women, etc… etc… etc…

There is a far more intelligent way to debate then spouting generalities.