Underwriters of IPO’s provide a valuable service for large companies that are seeking to go public. They can involve institutional investors and raise large sums of money. But, in today’s marketplace, underwriters do not believe that smaller companies justify their risk reward. The average IPO today raises over $200 million. Most companies going public today would have to possess a post IPO valuation north of $700 million to be able to attract an underwriter.

Simply put, this is the main reason that reverse mergers have become so popular. They have become the de-facto IPO marketplace for micro cap companies. This year there will be over 200 reverse mergers performed. Companies do not have to bend to the whims or demands of an underwriter fearing that their deal could be cancelled if they do not comply. Ask yourself this question; who knows better what your company needs, you or an underwriter?

Should a reverse merger company need funding they can raise initial capital through a PIPE financing.

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