reverse merger definition

reverse merger

Acquisition by a public firm (typically, only a shell company) of a private firm by transferring over 50 percent of its own stock (thus, handing over its controlling interest) to the private firm. Seen often as an easy way to take a private firm public, it actually jeopardizes the firm's existence because the original owners of the shell will be tempted to cash out (liquidate) their holdings whenever the firm attempts to enhance the market value of its stock (shares).

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