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date: 23 January 2020

Abstract and Keywords

Using a proprietary, recent shell reverse mergers (SRMs) sample, we analyze the financial profiling, financing event specifics, disclosure levels, and governance schemes of the private companies that are quoted on lower visibility platforms. We examine SRMs forward in time and identify a unique sample of SRMs that is successful getting upgraded to main U.S. stock exchanges. We report their financial characteristics and how they differ from the SRMs that do not manage to get upgraded. Further, we delve into the pricing, source of financing, and contractual terms of PIPE transactions that constitute their main capital raising events. We also note any differences in the financing and governance characteristics surrounding SRM firm listing changes. Our study contributes to the empirical going public literature by identifying the determinants of successful companies within lower visibility platforms and by justifying the necessity of the private secondary market’s existence.

Keywords: shell reverse mergers, going public, private investments in public equity, PIPEs, private equity placement, investor identity, contract terms, private secondary markets

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