A back door listing, aka a reverse initial public offering (IPO), aka a reverse takeover, aka a reserve merger (still with us?) is when a company takes the back door to be included on a stock exchange by buying an already publicly traded company. They either merge with this other company, or create a shell corporation that both companies fall under.
To be included on a stock exchange, most companies use the front door, which means going through the IPO process. But companies that don't qualify for an IPO, or don't want to go spend the time and money an IPO process takes, say, "shut the front door" and merge their way into the stock exchange through the back door.
If it sounds sketchy, that's because it kind of is. While totes legal, many investors give the cold shoulder to back door listings, since they see them as too weak to make it through an IPO. It's kind of like the principal's kid making the kickball team without trying out—just because he's the principal's kid. From lack of skill and resentment from the other kids on the team, you know he's going to get a ball (or two) in the face until he proves himself worthy.
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Finance: What's the difference between m...22 Views
Finance allah shmoop what's the difference between mergers and acquisitions
all right people listen up Merger that's what's about to
happen here it's a merger acquisition that's what's about to
happen here Corporate america is kind of same thing when
two companies merge while they generally you know attracted to
each other hopefully respect each other they share stock or
combined the stocks of each side and you know combine
efforts and then and then cuddle afterwards if they're successful
at the merger than the combination of two roughly equals
yields more than the one plus one combo that made
them so two companies get together on generally equal ish
footing In that case acquisitions are a combining more like
that eating thing on much different footing The large company
eats or buys the target either using its more highly
valued stock currency or it's taft to do so Well
why would a company acquire another Well the target might
have one hundred employees ninety of whom can be fired
with massive expense savings after the acquisition For the acquirer
such that economically the acquisition won't just makes a whole
lot of financial sense acquisitions happen for market power reasons
As well like imagine the negotiating leverage that amazon would
have if it bought the next five biggest online retailers
Or maybe it'll just kill them Probably not legal for
them to buy him anyway given the monopoly like dominance
of amazon these days But wow that would be a
powerful set of acquisitions And that would be a good
reason for ems on to acquire a whole bunch Things
and bezos would grow even more powerful maybe too powerful
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