I strongly believe that U.S. Reverse Mergers will begin to suffer the same fate as China Reverse Mergers.
Professionals attending a recent national reverse merger conference acknowledged that conditions have got a lot tougher in the reverse merger business, according to one of our clients who attended the conference. And a nationally known attorney who wrote a book on Reverse Mergers is reported to have said, “Anyone who’s doing nothing but China right now is freaked out.”
According to data from PrivateRaise, part of DealFlow Media:
“So far this year, there have been 29 reverse mergers of Chinese companies in the United States, compared with 47 in the first half of last year. At the end of last June, Chinese reverse mergers had raised more than $200 million. So far in 2011, that figure is less than $13 million, according to the data….”
I have long advocated going public directly rather than through reverse mergers unless certain circumstances are present. I believe that going through the SEC review process, although it takes a little time, provides the company with a solid foundation upon which to build its future as a public company in the U.S. This is just as true for U.S. companies as it is for Chinese companies or any other foreign companies.