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Post by fastwalker on Sept 23, 2004 10:34:08 GMT -5
 Commentary..question.. read the info posted below from another cmkx board....can anyone explain what a reverse merger is and how it will affect me as a stock holder? Please! Thank You! JJSeabrook God of Diamonds member is offline Gender: Posts: 1315 Re: SGGM alert on this shell stock web site.. « Reply #1 on: Today at 7:59pm » <br> --------------------------------------------------------------------------------- Alerts on Profiled Shells Stocks are not intended as an indicator to purchase/sell the stock. They are intended to inform users that a Shell Stock has issued a public announcement of an attempted/completed reverse merger. -------------------------------------------------------------------------------- 09/02/2004 NEW BUSINESS: Our Profile List stock St. George Metals, Inc. (OTCBB: SGGM 0.01 x 0.02) issued a Press Release announcing that the Company has finalized a joint venture agreement where St. George Metals, Inc. (Pink Sheets:SGGM) will purchase a 5% unencumbered and absolute interest in any and all mineral claims held by CMKM Diamonds, Inc. in consideration for $10,000,000 US Dollars and two hundred billion (200,000,000,000) restricted shares of SGGM. The disclaimer in red text above is pretty interesting. That's normally what happens with a shell corp. JJ PS:I changed the color to red, you couldn't see the yellow! Madi  I think this person should look in our "investing 101" section..lol, But a vlid point really.... 
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Post by fastwalker on Sept 23, 2004 10:36:25 GMT -5
reply....
Subject: Stocks - Reverse Mergers
Last-Revised: 14 July 2002
Contributed-By: The SmallCap Digest (www.smallcapdigest.net)
A reverse merger is a simplified, fast-track method by which a private company can become a public company. A reverse merger occurs when a public company that has no business and usually limited assets acquires a private company with a viable business. The private company "reverse merges" into the already public company, which now becomes an entirely new operating entity and generally changes name to reflect the newly merged company's business. Reverse mergers are also commonly referred to as reverse takeovers, or RTO's.
Going public (in any way) is attractive to companies because after going public, the company can use its stock as currency to finance acquisitions and attract quality management; capital is easier to raise as investors now have a clearly defined exit strategy; and insiders can create significant wealth if they perform.
The reverse merger is an alternative to the traditional IPO (initial public offering) as a method for going public. Many people don't Advertisement
realize there are numerous other ways for private company to become publicly traded outside of the IPO. One widely used method is the "Reverse Merger".
The reverse-merger method for going public is more prevalent than many investors realize. One study estimates that 53% of all companies obtaining public listings in 1996 did so through the "Reverse Merger". The same study concluded about 30% of newly publicly listed companies got there through Reverse Mergers in 1999. Percentages have recently dropped because Wall Street Investment Banking firms have had a huge appetite for IPOs in the late 90s. This led to many marginal companies receiving enormous financial windfalls.
In a reverse merger, the original public company, commonly known as a "shell company," has value because of its publicly traded status. The shell company is generally recapitalized and issues shares to acquire the private company, giving shareholders and management of the private company majority control of the newly formed public company.
The RTO (reverse take over) method for going public has numerous benefits for the private company when compared to the traditional IPO:
Initial costs are much lower and excessive investment banking fees are avoided.
The time frame for becoming public is considerably shorter.
There are also several disadvantages of going public through the RTO as compared to an IPO:
There is no capital raised in conjunction with going public.
There is limited sponsorship for the stock.
There is no high powered Wall Street Investment Banking relationship.
The stock generally trades on a low exposure exchange.
Many highly successful companies have become public through the RTO process. However, there some important negatives investors should be aware of.
There is a much higher failure rate amongst RTO companies versus the traditional IPO. Much smaller and less successful companies are able to become public through the RTO, and many are badly undercapitalized. Often these stocks trade very inefficiently in the absence of any sponsorship or following.
There is a cottage industry of merchant bankers and entrepreneurs who specialize in orchestrating reverse mergers. Unfortunately, there are no barriers to entry in this field. Therefore, scams are common place.
Through various methods, scam artists manage to accumulate large positions in the free trading shares of the shell company. An RTO is consummated with a marginal private company, and the scam artists put together a massive publicity campaign designed to create activity in the stock. Unrealistic promises and absurd claims of corporate performance find their way to the public. The enhanced trading volume allows the scam artist to dump his shares on the unsuspecting public, most of whom eventually lose their money once the newly formed public company fails. This scam is commonly known as a "Pump and Dump".
Alternatively there a hundreds of examples of highly successful companies which have yielded millions in profits for investors that have gone public through the RTO. Many of these companies deserve exposure to investors. Initial valuations can be reasonable, providing excellent opportunities for individual investors to accumulate positions ahead of Wall Street institutional money.
Here are some high-profile and successful RTOs:
Armand Hammer, world renowned oil magnate and industrialist, is generally credited with having invented the "Reverse Merger". In the 1950s, Hammer invested in a shell company into which he merged multi decade winner Occidental Petroleum.
In 1970 Ted Turner completed a reverse merger with Rice Broadcasting, which went on to become Turner Broadcasting.
In 1996, Muriel Siebert, renown as the first woman member of the New York Stock Exchange, took her brokerage firm public by reverse merging with J. Michaels, a defunct Brooklyn Furniture company.
One of the Dot Com fallen Angels, Rare Medium (RRRR), merged with a lackluster refrigeration company and changed the entire business. This was a $2 stock in 1998 which found its way over $90 in 2000.
Acclaim Entertainment (AKLM) merged into non operating Tele-Communications Inc in 1994.
more...
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Post by fastwalker on Sept 23, 2004 10:36:59 GMT -5
continued... Think of the shell company as a rented Tuxedo. That Tux has been to several parties before now. Some of them it had fun, and some it didn't, but its back on the shelf now waiting for its new user/owner. You can't go to the party you want to go to without a Tuxedo. So you make a deal with the Tux rental company and take it home. Once you're there, you take off your clothes and you put on the Tux. You move your car keys and your wallet to the Tux and then you get to go to the party. From outside appearances, its still you, but you are now dressed appropriately. It may still be the same old stinky you underneath, but you get to party with the big boys tonight. In a reverse merger, the operating company buys a shell and mergers or combines it up into itself. The old operating company continues on, but now the attributes of the public shell company are in place and the company can now trade. Saves on legal fees, filing fees, turn around time, and evidently all kinds of other complicated red tape, nasty homework type stuff if you tried to do one from scratch. www.entrapreneur.com/article/0%2C4621%2C300886%2C00.html |
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Post by fastwalker on Sept 23, 2004 10:38:33 GMT -5
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Post by IQ on Sept 23, 2004 18:28:05 GMT -5
Thanks for the explanation always nice to get another perspecitve. I just had a MARJOR BRAIN storm !!!!!!!!!! Based on "In a reverse merger, the original public company, commonly known as a "shell company," has value because of its publicly traded status. The shell company is generally recapitalized and issues shares to acquire the private company, giving shareholders and management of the private company majority control of the newly formed public company. " Is it possible that this is the plan: CMKX has a private company called CIM. CIM is going to become publicly traded using the shell company ? Therefore CIM now makes us the Internal guys with the Dividends on their way very very wealthy. It would make a lot of sense. Is this the plan Urban has been talking about ? Let me know what you think. ;D ;D ;D |
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Post by saturn48021 on Sept 23, 2004 20:17:53 GMT -5
Oh just one little question please.
What happens to the people that own stock in the shell company?Is their stock worth more or less?After the merger.
Saturn
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Commentary..question..
