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We can say that the backdoor listing or reverse merger have both intrinsic benefits and intrinsic problems. And if the prospectus will not be issued then the company may not get wide publicity. There is a huge cost associated with the prospectus which makes this argument of “Backdoor listing cheaper than conventional IPO mode” insignificant. The backdoor listing process is not that simpler or faster when it comes off the different line of business and due diligence which needs to be done on shell and target company. Note: – The best way to safeguard yourself against the stock dump after the accomplished takeover is by locking up the shares so that the shareholders who hold the stocks as investors pose no threat and the holding shares will be insignificant. In doing so, they may be responsible for reducing the price of shares. It is natural in some shareholders of the listed company to not be a part of resulting company and plan an exit strategy which may or may not include the selling of stocks. On top of that these shells may come with some shareholders who are planning to dump their stock in the stock market at the first chance they get. The one major drawback of reverse initial public offering (IPO) is the dark history which can be in the form of sloppy records, unforeseen liabilities, and pending lawsuits. There are hidden things behind the curtains which need to consider before taking the big step. The operation now runs 30 trucks altogether, nine trucks in Inverell and 21 in Tamworth, where Cavanagh is now based. Continuity for the customers is also very important. Is backdoor listing as swift as it seems?Īpparently, the backdoor listing is not as great as we think it is. Stockmaster is very good at some things and there are other things which Cavanagh's are very, very good at. But, by backdoor listing, an unlisted company can merge with the foreign listed company. It is very common for a company unable to meet the minimum requirement of getting listed in abroad. The backdoor listing has the most significance for companies who are looking for getting listed in foreign jurisdictions. If the two companies have the same business line then the reverse merger will take a lot less time than IPO.
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Reverse IPO is also simpler as compared to the conventional mode when two companies operate in a same line of business. On another side, the backdoor listing is independent of market conditions and a lot cheaper as compared to conventional method. You can say if the market is positive then the conventional cost will be in your favor but if the market is negative then you can get quite the opposite results. The conventional method of IPO influenced so much by the market condition. Companies opt for backdoor listing against conventional IPO method is because of it being the faster and cheaper mode and the companies do not require raising the initial capital to perform it. Many companies decide on the basis of intrinsic benefits and mutually required by the acquiring and target company. There is nothing illegal with the backdoor listing to process for the public offering.