Rare Misstep by Reverse Merger Report

I am preparing a formal response to the lead article in the newest issue of the Reverse Merger Report, and my hope is they will publish it in the next issue. The article’s headline purports to suggest that Form 10 shells are suffering. The lead quote, from a “reverse merger specialist” who did not want to be named, declares these to be a complete sham. The article then took quotes from other leading figures that seemed to talk more about issues with shells in general. No comments that were attributed were specific as to Form 10s. One person who was quoted confirmed to me that his quote was out of context. It is one thing to suggest that shells may have more limited value than before the Rule 144 changes a year ago (this is probably true). I am a proponent of other alternatives such as self-filing.

But the article’s headline leads one to believe that Form 10s in particular are evil shams, yet nothing in the article points to them as any different from other types of shells. I was quoted as well and spent quite a bit of time talking with the reporter. The main impetus of my argument was not included: that shells do have a limited value- namely, to facilitate a financing sooner rather than later when that is needed and the financing source insists on the company being public to do so.

If one were to take literally the thrust of the quotes, which really were about shells in general and not Form 10s, the RMR might just as well shut itself down and cancel next year’s Reverse Merger Conference, because the leading figures are quoted as saying essentially that shells are just for bad guys. In that case, our entire industry is therefore worthless and a bunch of crooks. The only countervailing quotes that were included, from me and a few others, were seeking to defend shell prices, but our comments arguing that shells indeed have value were not included.

I am a strong supporter of DealFlow Media and everything they do. Heck, its owner Steven Dresner is a contributor to my book and a friend. So this pains me even more to feel the need to question the thrust of this article. It is indeed rare to ever feel that their journalistic approach is anything other than fair and balanced. But here I feel no choice but to speak out.

We all have a tough enough time in the broader financial world bringing our industry to a perception that legitimate, exciting deals can get done with clean, sophisticated players, especially with no IPOs available for smaller companies. For our own industry voice, supposedly objective, to include such a scathingly negative portrayal of shells in such a surprisingly one-sided piece was truly disappointing.

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