Reverse Merger Report Touts Form 10 Shells

In the most recent issue of the Reverse Merger Report, the growing popularity of using Form 10 shells in reverse mergers of Chinese companies was reported. In particular, notes the article, some Chinese dealmakers are finding frustration with companies merging onto the OTC Bulletin Board. They feel that WestPark Capital’s WRASP structure, in which a company merges into a Form 10 shell with a contemporaneous PIPE, followed by a small secondary public offering and listing directly onto the NYSE AMEX or Nasdaq, is a preferable and cleaner way to move directly to a larger exchange.

Other investment banks, such as Rodman & Renshaw, Maxim Group and Broadband Capital, have become involved in transactions with a similar structure. More and more Form 10 shells are now being created, including several groups set up by law firms active in this space. While of course the Form 10s are not for every deal, their utility in WRASP type deals is undeniable. Disclaimer: Our law firm has done work for all the firms mentioned in this post.

Some expressed concern about moving directly to the higher exchange. They like the idea of “practicing” being a public company on the OTCBB, where governance and other restrictions are not quite as stringent. Others watch many of these companies languish without an ability to uplist without great difficulty. You say potato, I say potato…

Thanks, RMR, for a more balanced piece than those you have written in the past about these clean shells.

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