Using Form 10 In Going Public Transactions
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| − | Many issuers seeking to raise capital often attempt to go public using a | + | Many issuers seeking to raise capital often attempt to go public using a reverse merger with a public shell. Blank Check Companies which file Form 10 Registration Statements ("Form 10 Shells") are being marketed as a method for private companies to obtain public company status. |
Often Form 10 Shells are not a timely solution or cost effective method for a private company to obtain public company status. Most Form 10 Shells are not structured properly for a publicly traded company and most do not have ticker symbols. | Often Form 10 Shells are not a timely solution or cost effective method for a private company to obtain public company status. Most Form 10 Shells are not structured properly for a publicly traded company and most do not have ticker symbols. | ||
| − | Additionally, the private company purchasing the Form 10 Shell will have the time and expense of: (i) due diligence and completing the [http://www.securitieslawyer101.com/reverse-mergers/ reverse merger] transaction into the | + | Additionally, the private company purchasing the Form 10 Shell will have the time and expense of: (i) due diligence and completing the [http://www.securitieslawyer101.com/reverse-mergers/ reverse merger] transaction into the Form 10 Shell; (ii) notification to and approval of FINRA pursuant to Rule 6490; and (iii) additional disclosures including the filing of [http://www.gopublic101.com/Form-10 Form 10] Information in a "Super 8-K" which is triggered by the reverse merger. |
Purchasing a Form 10 shell does not assist a private company in becoming public; it makes it more costly, time consuming and difficult. Often a Form 10 Shell is subject to the SEC's reporting requirements but its securities are not publicly traded. As such, the purchaser of a Form 10 Shell may incur the expenses of SEC reporting yet derive no benefit because its securities are not publicly traded. As a result, the costs of Form 10 Shells exceed the expenses of a direct public offering and listing. | Purchasing a Form 10 shell does not assist a private company in becoming public; it makes it more costly, time consuming and difficult. Often a Form 10 Shell is subject to the SEC's reporting requirements but its securities are not publicly traded. As such, the purchaser of a Form 10 Shell may incur the expenses of SEC reporting yet derive no benefit because its securities are not publicly traded. As a result, the costs of Form 10 Shells exceed the expenses of a direct public offering and listing. | ||
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A company can also file a registration statement under the Securities Exchange Act of 1934 (the "Exchange Act") to register an entire class of securities, while a Securities Act registration registers a certain number of a particular class of securities. | A company can also file a registration statement under the Securities Exchange Act of 1934 (the "Exchange Act") to register an entire class of securities, while a Securities Act registration registers a certain number of a particular class of securities. | ||
| − | Unlike a registration statement on Form S-1, a | + | Unlike a registration statement on Form S-1, a Form 10 also does not affect the tradability of securities. After a Form 10 registration statement becomes effective, restricted securities remain restricted and unrestricted securities remain unrestricted. |
When is Form 10 Registration Required? | When is Form 10 Registration Required? | ||
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The Solution | The Solution | ||
| − | By undertaking a Direct Public Offering, the issuer avoids many of the expenses and risks associated with [http://www.securitieslawyer101.com/reverse-mergers/ reverse merger] transactions, including incomplete and sloppy records, pending lawsuits and other liabilities including securities violations. After a reverse merger with a Form 10 Shell, the private company is forever labeled as a shell or reverse merger issuer, which makes it much more difficult to raise capital because Rule 144 is unavailable for its investor's resales. Issuers who | + | By undertaking a Direct Public Offering, the issuer avoids many of the expenses and risks associated with [http://www.securitieslawyer101.com/reverse-mergers/ reverse merger] transactions, including incomplete and sloppy records, pending lawsuits and other liabilities including securities violations. After a reverse merger with a Form 10 Shell, the private company is forever labeled as a shell or reverse merger issuer, which makes it much more difficult to raise capital because Rule 144 is unavailable for its investor's resales. Issuers who go public through direct public offerings avoid the shell company and reverse merger stigma. Additionally, issuers who [http://www.gopublic101.com/going-public go public] direct have lower costs and the added credibility associated with providing transparency by filing an S-1 registration statement with the SEC. |
For more information about [http://www.securitieslawyer101.com/reverse-mergers/ reverse merger] transactions please visit our blog post at: | For more information about [http://www.securitieslawyer101.com/reverse-mergers/ reverse merger] transactions please visit our blog post at: | ||
http://www.securitieslawyer101.com/reverse-mergers/ | http://www.securitieslawyer101.com/reverse-mergers/ | ||
| − | For further information about this article or how to go public, please visit www.securitieslawyer101.com or contact Brenda Hamilton, Securities Attorney at bhamilton@securitieslawyer101.com or 561-416-8956. This memorandum is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. For more information concerning the rules and regulations affecting the use of Rule 144, Form 8K, FINRA Rule 6490, Rule 506 private placement offerings, Regulation A, Rule 504 offerings, Rule 144, SEC reporting requirements, SEC registration on Form S-1 and Form 10, Pink Sheet listing, OTCBB and OTC Markets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, go public direct transactions and direct public offerings, please contact Hamilton and Associates Securities Lawyers. Please note that the prior results discussed herein do not guarantee similar outcomes. | + | For further information about this article or how to [http://www.gopublic101.com/going-public go public], please visit www.securitieslawyer101.com or contact Brenda Hamilton, Securities Attorney at bhamilton@securitieslawyer101.com or 561-416-8956. This memorandum is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. For more information concerning the rules and regulations affecting the use of Rule 144, Form 8K, FINRA Rule 6490, Rule 506 private placement offerings, Regulation A, Rule 504 offerings, Rule 144, SEC reporting requirements, SEC registration on Form S-1 and Form 10, Pink Sheet listing, OTCBB and OTC Markets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, [http://www.gopublic101.com/going-public go public] direct transactions and direct public offerings, please contact Hamilton and Associates Securities Lawyers. Please note that the prior results discussed herein do not guarantee similar outcomes. |
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