Pros And Cons Of Reverse Mergers – Part 3

by Bullhunter on May 27, 2010

Pros And Cons Of Reverse MergersWe’re nearing the end of this series on reverse mergers. They’re a pretty crazy deal, so now it’s time to check out how to spot them and why you may want to invest in them.

They’re not a guaranteed success, but a good reverse merger can really mean tremendous profits.

Finding Potential Reverse Mergers

Finding Reverse MergersReverse mergers are often pretty hard to detect in advance, but there are ways in which you can train your eyes and mind to spot them before they occur. One of the first and most obvious examples of why a company would pursue a reverse merger is the pursuit of capitalization at the appropriate time.

Generally speaking, reverse mergers succeed for those companies that don’t require the capital it provides them immediately. A public company that is successful will generate at least $20m in terms of sales and possess $2m in capital.

Another sign for a potential reverse merger is a company looking to generate at least half a million for working capital. This is meant to take advantage of the flexibility and performance of a large-scale public company that is transparent on the market.

Reverse mergers can be really successful. One of the best includes Armand Hammer’s merger into Occidental Petroleum. There’s also the matter of Ted Turner completing a reverse merger with the Rice Broadcasting company to form his own Turner Broadcasting corporation. Both were tremendous successes, and stand to show you why you should look for a reverse merger and evaluate it.

Reverse Mergers - Time Equals ProfitsReverse Mergers – Time Can Equal Profit

There’s no two ways about it; reverse mergers take time. If you want to look for one, you’re going to have to pay careful attention to financial media and recognize when companies are trying to raise capital. You’ll also want to ensure that they plan on earning at least $20m in terms of sales when they become a public company.

Regardless, to be successful, you should take the time to understand that investing in a reverse merger may take awhile before it sees a turnaround. However, a good investment can yield some of the most tremendous profits when two companies become a large and highly successful public company.

That completes this series on reverse mergers. For any good investment, always evaluate the possibilities and carefully consider your options. That’s the ticket to smart investing. There are plenty more investing strategies and articles coming up, see you again for the next exciting series!

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

{ 5 comments… read them below or add one }

Richard Colum May 31, 2010 at 10:26 pm

Thank you for your very interesting post on merging. I found this post to be very informative .

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Bullhunter June 1, 2010 at 3:39 pm

Glad to hear you found the article beneficial Richard. Keep your eyes peeled for a potential reverse merger, you never know when a profitable opportunity may arise.

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Ora Carpen June 8, 2010 at 2:37 am

Thats great stuff you got on your blog. Been hunting for details on this all over. Great blog

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Bullhunter June 8, 2010 at 12:01 pm

Happy to help Ora, come back soon :-)

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Jazz Salinger July 30, 2010 at 8:48 pm

Hi Sean,

I think this strategy is out of my league. I plan on reading more financial publications to learn what is happening with the companies I’m interested in buying stocks in but I think it’s going to be a while before I can see a reverse merger coming.

It’s an interesting strategy but I think it’s one that’s in the future for me.

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