FLIGHT TO QUALITY

Over the past two years there has been an overwhelming trend in the reverse merger market which you could call a “flight to quality.” As the number of players in the market has dropped, market participants are looking for companies having a better track record, and looking away from pure startups. This is driven by the fact that market participants have been staying away from the micro-cap market due to the sluggish recovery.

Another reason is that the transaction costs are similar for a micro deal versus a ”nano” transaction.

As more alternatives such as Regulation A+ and expanded Regulation D are available, it becomes very confusing for the potential IPO company to choose a path. In truth, the CEO must choose between a  bewildering array of alternatives: regulation A+, IPO on form S-1, reverse merger into a publicly traded shell company, reverse merger into a non-shell shell, or venture capital. It is essential for the CEO to determine fact from fiction, myth from method, and find the best deal for his company.