WRASP-Type Structure Catches On

The Reverse Merger Report notes in its September issue that Lihua International, Inc., which makes copper wire in China, completed a secondary public offering raising $9.2 million. This after raising $15 million in a PIPE contemporaneous with its reverse merger with a Form 10 shell back in October. Disclaimer: my firm represented the shell in the original reverse merger. The secondary offering was underwritten by Broadband Capital and Rodman & Renshaw. Broadband was the placement agent in the original $15 million PIPE.

The transaction is notable for several reasons. First, all were proud that in late October 2008 a reverse merger and $15 million PIPE were completed when the markets were tanking. Second, it marks the first transaction apparently designed to mimic WestPark Capital’s WRASP structure to take a private company public with the first trades on a major exchange. Here, the company now trades on the Nasdaq following its secondary public offering. As a reminder, in a WRASP a private company merges with a Form 10 shell and completes a simultaneous PIPE. It then seeks to register the shares of the PIPE investors while contemporaneously seeking a secondary public offering and application to the NYSE Amex or Nasdaq. WestPark has completed nine WRASPs for Chinese companies (more disclaimer: we created the shells that were used in those transactions). It took quite a bit of time for WestPark to convince the NYSE Amex to buy into the concept, but once they did these transactions have moved very efficiently to completion.

In the new edition of my  book, coming out in December, there is a full write-up on the WRASP and where it might be headed. As I have said, the smartest ideas are often the simplest. I am aware of at least one other RM player that is working on a WRASP-type deal. Let’s hope this is the start of a trend!

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