הראש ושות' - עורכי דין
Public Shell Company - "Even though I walk through the valley of the shadow of death..."
What Is a Public Shell Company?
A public shell company is just like any other traded company (a company whose shares are traded on the stock exchange). Most of the trading on the stock exchange is considered diluted, because there is no activity in the company. Lack of activities is due to or from the company failure, or the sale of operations. Anyone can acquire a “public shell”, merge it with content, and thus enjoy the advantages of the capital market in terms of raising and public exposure, as well as conduct as the public market demands. The advantage of entering the capital market through a “public shell” is skipping the initial public offering process that is considered long, requires relatively high threshold resistance and involves high costs. The process of entering the stock exchange through the “back door” is a process whereby the owner of the private company, who wants to make it public, transfers its holdings in the activity, and in exchange receives maintenance rates from the public company (usually control).
Pros for Public Shell Company?
There are several advantages in merging the activity of a private company into a public shell company which are:
The Need for Speed, Such a merger can be completed in a relatively short time.
A more tradable company, a currency in a public company more tradable than a private company, and sometimes it makes it easier to raise capital.
Liquidity, Shareholders who have been unable to liquidate their shares by other means, such as selling them back to the company or selling the entire business.
Being public Company makes the issuance of stock options/ bond much more attractive to the recipients. If they elect to exercise their options, they can then sell the shares to the general public.
Sometimes it is possible and in certain cases to leverage the acquisition of a public company that has accumulated losses for tax purposes, and offset them against the new activity of the acquired company. (Subject to conditions determined by the Supreme Court)
Cons for Public Shell Company?
There are several disadvantages in merging the activity of a private company into a public shell company which are:
A company may not achieve an immediate cash inflow from the sale of its stock, as would be the case if it had taken the path of an initial public offering.
Even the relatively lower-cost still requires a large ongoing expenditure to meet the requirements of being public.
There is a risk associated with buying the liabilities that still attach to the old public company shell.
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