A public shell company (Shell Corporation) is an SEC reporting public company that engages in little to no business activity whatsoever. Quite often these public shell companies contain little to no business assets, revenues, or earnings. The main use and benefit that public shell companies provide is a relatively fast method for private businesses entities to go public through the reverse merger process.
A Public Shell can also be commonly referred to as: Public Shell Corporations or Public Shell Companies.
The Securities and Exchange Commission (SEC) is the primary agency in charge of overseeing and enforcing the many laws, rules, and regulations within the securities industry, as well as the public stock markets within the United States of America (USA). Public shells (shell companies) oftentimes have no income or little assets; these factors allow for a private company to go public in a relatively quick time frame via reverse merger with a public shell company. It is one of the main reasons that private companies opt to go public through a shell company. Another main benefit of going public with a shell company is that it can be significantly less costly to go public rather than the "traditional" going public methods such as an IPO (Initial Public Offerings). Also, companies that go public typically receive a higher valuation than their private counterparts.
Reverse mergers (also known as reverse takeovers) is the process in which a privately owned company merges with a public shell company to go public in a relatively quick manner. This method of going public may also provide a less costly alternative than most traditional IPO's. Many companies have successfully transitioned from private company to public company using this exact same method. Other benefits of going public through a reverse merger may include:
Also included are all the benefits of being a publicly owned company, which could include: Higher valuation, promotion of stock to the general public, employee stock options, increased corporate awareness, and more.
Private company owners are attracted to the idea of increased capital if they go public. However, this depends on how investors perceive your company.
A lot of successful publicly owned companies came from privately owned businesses. Certainly there are many reasons why businesses go public and the potential to raise capital is the primary reason. However, there are others. We have a report listing the possible benefits of being a public company. Other reasons businesses go public is in hopes of faster and more corporate growth. It is important for business owners to perform their due diligence and research when deciding to go public. Securities filing is a complex industry with specific guidelines as to how public companies operate. It is important to seek an experienced securities law firm or securities attorney to help guide you towards taking your company public.
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