Miro Zecevic

Reverse takeover - Canada Reverse takeover is transaction in which public company listed on a stock exchange in Canada with few or without assets (often referred as shell company) acquires all securities of a private company with a significant assets and operation. It is considered a less expensive and time consuming alternative to initial public offering (IPO). This way public companies acquires all securities of public company and it becomes direct or indirect wholly-owned subsidiary. Shareholders of the private company receive shares from the public company  and the operating company's shareholders ultimately acquire a controlling interest in the new, combined company. Shell companies may be created and maintained just for purpose of reverse takeover or it can be existing company, a reporting issuer that have previously ceased operations, but still maintain their reporting issuer status and usually have the shareholders required to list on a stock exch...

Reverse takeovers An RTO involves a smaller quoted company taking over a larger unquoted company by a share-for-share exchange. In order to acquire the larger unquoted company, a large number of shares in the quoted company will have to be issued to the shareholders of the larger unquoted company. After the takeover the current shareholders in the larger unquoted company will hold the majority of the shares in the quoted company and will therefore have control of the quoted company. Reverse takeovers benefits include: Easier access to capital markets As a listed company, more finance is likely to be available and the cost of that finance is likely to be lower than if the company was still unquoted. Higher company valuation As the shares in the company will be listed, potential investors will deem the shares to be less risky as the company will have to abide by the relevant rules and regulations. Enhanced ability to carry out further takeovers Once the s...