Lets start by saying going public through a reverse merger is no longer looked upon as being a negative. Some of the greatest companies in the US went public using a shell: Berkshire Hathaway, Tandy Corporation, Occidental Petroleum, Blockbuster Entertainment and most recently The New York Stock Exchange.

Reverse mergers are far more versatile than IPO’s and in most cases they are the only US vehicle available to take your company public. This is due to fact that investment banks no longer want the risk associated with taking smaller companies public. After the IPO market crashed and most Internet companies tanked the investment bankers got religion and started taking the safer, more traveled, high road.

It is no coincidence that the average IPO today raises over $200 million and the valuations of most companies are over $1 billion. So unless you have a company that is earning in excess of $50MM a year you’re probably not going to attract an underwriter anytime soon.

But here is the good news! In 2006 the number of reverse mergers exceeded the number of IPO’s. Also, the average valuation for a reverse merger that included a capital raise was in excess of $50 million. Reverse mergers have finally come center stage and are no longer considered the red headed stepchild to the investment banking community.

Additionally, once the SEC enacts its current proposal to reduce the hold time for 144 stock from one year to six months equity financings for reverse mergers will replace the more popular PIPE financings.

For more information about the proposed revisions to Sec Rule 144 and 145 go to: http://www.cooley.com/news/inthenews.aspx?id=40665520

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