Don't Trust the Headlines: Reverse Mergers are Still an Attractive Option

David Feldman |


In the securities world, the big guys often get hit and sanctioned for improper activity. Big banks and investment banks all pay for misdeeds - some callously viewing it as nothing more than the cost of doing business. The Enron and WorldCom scandals, among others, taught us that big companies can also be fraudulent enterprises. Unfortunately, the small and microcap worlds, and reverse mergers in particular, also have their share of questionable characters. The latest is a well-known player in the space being accused of hiding his ownership in shells before they completed reverse mergers with Chinese companies and manipulating the trading and price of those stocks. He and others could face jail and big fines.

No News Like Bad News

Sadly, we don’t see New York Times stories about the great reverse merger successes, like Texas Instruments Incorporated (TXN) , the New York Stock Exchange, Jamba Juice (JMBA) , Cougar Biotechnology ($CGRB) and many others. And despite additional regulatory burdens added after dozens of Chinese companies were accused of fraud after reverse mergers, the technique remains worth considering if you deal with legitimate and experienced players. It is still the fastest way to go public...and a very cost-effective method, as well.

There are a number of ways to bring a public trading stock to companies that can benefit from it, including the new arrow in the quiver by the name of Regulation A+. In advising companies, we make sure they understand each of the options - the advantages and disadvantages. The fact that a good technique has been abused has always seemed a shame to me. Reverse mergers are not for everyone, but they can be the right choice for some. Just stay on the high road!

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


Symbol Name Price Change % Volume
JMBA Jamba Inc. 10.60 0.05 0.47 7,186
TXN Texas Instruments Incorporated 71.00 0.27 0.38 874,811


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