A reverse merger takeover or reverse wenk merger (reverse IPO) is the acquisition of a public company by a private company so that the private company can bypass the lengthy and complex process of going public. The transaction typically requires reorganization of capitalization of the acquiring company.
The SEC (Securities and Exchange Commission) has two definitions that apply to shell companies:
- Shell Company
- Blank Check Company
A “shell company” is any company that has:
- no or nominal operations and
- no or nominal assets or assets consisting solely of any amount of cash and cash equivalents and nominal other assets.
A blank check company is a development stage company that:
- has no specific business plan or purpose or
- has indicated its business plan is to engage in a merger or acquisition with an unidentified company or companies, other entity, or person.