Why We Should Shell Out For Reverse Mergers
One of (if not) my favorite value investing blogs, Greenbackd, has created a fascinated post on reverse mergers. I highly recommend reading this material….it seems that as long as the probability of a reverse merger is high investing in a shell company might make sense.
(Big H/T to GreenBackd for linking to this)
Click Here To Read About Investing In Reverse Mergers
Excerpt (Via GreenBackd)
“When a takeover agreement is consummated, shell company three-month abnormal returns are 48.1%.”
What’s a shell?
The SEC defines any company with “no or nominal operations, and with no or nominal assets or assets consisting solely of cash and cash equivalents” as a shell company. All companies reporting to the SEC must indicate whether they declare themselves a shell company according to Rule 12b-2. Shell firms are traded either on the OTC Bulletin Board (OTCBB) or through Pink Sheets. According to the authors, “[most] shells come into existence either with the sole intent of merging with unidentified single or multiple companies (these are called virgin shells), after being created with a business plan that fails to materialize (these are called development stage shells), or after selling their operations and assets following bankruptcy (these are called natural shells).”
