Reverse mergers are becoming more popular with Chinese companies looking to get a U.S. stock listing.
Chinese companies see a reverse merger as a way to get access to funds in the U.S. while avoiding some of the regulatory barriers in seeking an initial public offering.
Some current shells that are targets of Chinese firms include Malibu-based Along Mobile Technology, Wyoming-based Art Boutique, Nevada-based Alpha Spacecom Inc. and Washington-based Black Gardenia, according to the Reverse Merger Report, a publication of DealFlow Media Inc.
“There is a tremendous amount of activity coming out of China,” said Daniel K. Donahue, a partner with Preston Gates & Ellis LLP in Irvine. His law firm, which specializes in mergers and acquisitions and corporate finance, has offices in major Chinese urban areas.
Preston Gates is working on a reverse merger involving a Beijing manufacturing company that will raise $20 million in an equity placement at the same time as the merger.
“It has strong management and is large,” Donahue said. “It would be a strong IPO candidate, but it’s choosing to do a reverse merger.”
China BAK Battery Inc., which used a reverse merger to get a stock listing and attract funds, recently gave a pitch on its business strategy at the Roth Capital Partners LLC’s conference in Dana Point.
Its year-ago reverse merger and listing took three-and-a-half months and raised $17 million. China Bak makes and distributes lithium ion rechargeable batteries for cell phones, laptops and portable music devices.
“For Chinese companies, the big attraction also is the prestige of getting a listing on the U.S. stock market,” said Brett Goetschius, executive editor of DealFlow Media.
,Pat Maio
