Pros And Cons Of Reverse Mergers – Part 1

by Bullhunter on May 11, 2010

The stock market is always changing, with companies growing or shrinking, some being bought out while others opening up for public stock trade. With so much going on, there are a wide number of ways in which the status of a company or two can change depending on their behavior. This not only affects their availability for investments, but also the value at which they’ll command.

In this 3 part series, we’re going to take a look at the pros and cons of reverse mergers

What Is A Reverse Merger

What Is A Reverse MergerOf all the types of market actions out there, perhaps one of the most complicated and least understood is a reverse merger. A reverse merger is also known as a reverse takeover, which is one of the least traditional ways of raising capital. Basically speaking, a reverse merger is when a private company manages to become a public one by purchasing the control of a public company.

The resulting changes are that the shareholders of the private company usually receive the largest amount of ownership in regards to the public company, and they gain control over its board of directors. After this is complete, the two companies merge to become one company that is publicly traded.

This particular behavior involves a wide number of factors that can take on several results, both good and bad. It’s advantageous for you to understand how to invest wisely when a reverse merger occurs. With so many elements involved and factors to consider, a reverse merger can result in anything from total ruinous failure to immense profits.

For the following entires in this series, we’re going to be examining the pros and cons of a reverse merger, how to look for those that may occur, and how you might find some great opportunities for investment.

A careful eye and good insight will ensure that your investment will pay off. Join us next time for more important information regarding the world of investing.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 – 2010

{ 4 comments… read them below or add one }

Jo Carey-Bradshaw July 17, 2010 at 12:33 pm

Wow, the wonders of a great headline! I couldn’t resist visiting this page – why would you talk about pulling apart a hamburger?
But seriously, now that you have explained this so nicely, I do recall seeing the results of this action, albeit from afar. I guess the best benefits for the shareholders would have to accrue from being with the right party. Now I’m going to have to learn more. Good, just as well I’m on the right site to make a start!!


Elly July 22, 2010 at 7:48 pm

Grammar/spelling mistake in second to last paragraph “For the following entires in this series”


Elly July 23, 2010 at 7:03 pm

Hi Sean

This is an interesting article looking at a different perspective of investing in a company that is having a reverse merger.

Seems a bit complex to me and more of a ‘hit and miss’ strategy, definitely not my cup of tea.


Jazz Salinger July 30, 2010 at 7:58 pm

Hi Sean,

I don’t know anything about reverse mergers other than what you’ve just told me. I understand the concept but I’m not sure what I’m looking for in terms of making money from this situation.


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