Reverse mergers; avoid them if you can.

If given the choice between going public through a reverse merger and staying private, there is no question we would opt to stay private. Companies who enter into reverse merger transactions often do so without a complete understanding of the real costs and issues. For example:

1. The cost of the public shell. 

Shells are priced with a cash cost and a share cost. Ask around and people will tell you that a "clean shell" (what exactly is a clean shell?) can be purchased for between $500,000 and $750,000. For that amount of money, you should be able to get 95% of the outstanding shares, which means that the shell also cost you 5% of your company.

Let's examine the 5% owned by the public. These people either had stock in a real company they thought was going somewhere but became defunct and is now a shell - or, they bought stock knowing it was a shell, hoping the company would enter into a reverse merger transaction that would turn the company into something. Either way, the stockholders are the same....they are "sellers".  They will sell every share they can, at any price they can, regardless of how magical your company is. They don't know you or your business and they just want as much money as they can get for their shares.

                                                
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