In today’s stock market world, companies are faced with a variety of options to go public and raise equity capital for financing and growth.
These options range from traditional initial public offerings (IPOs) to innovative approaches such as shell companies, special purpose acquisition companies (SPACs), reverse mergers, reverse IPOs and reverse takeover transactions.
While the traditional IPO is still commonly known, the question arises as to the differentiation between shell companies, SPACs, reverse IPOs, reverse mergers and reverse takeover transactions.
Here is a brief differentiation:
In contrast to conventional IPOs, shell companies are available to companies as a vehicle company to go public in a cost- and time-efficient manner. A reverse merger, reverse IPO or reverse takeover refers to the practice whereby a private company takes over an already listed company in order to complete its own IPO.
The main difference between a reverse merger, reverse IPO, reverse takeover and a SPAC (Special Purpose Acquisition Company) lies in the way in which the IPO takes place. In a SPAC, an empty shell company is first floated on the stock exchange in order to later acquire a private company and float it on the stock exchange. In contrast, a reverse merger, reverse IPO or reverse takeover involves going public directly by acquiring a company that is already listed on the stock exchange.
The advantageousness of the individual options depends on the company-specific requirements, the organisational structures and the company’s objectives.
