Journal article

Shell companies as IPO alternatives: An analysis of trading activity around reverse mergers

M Aydogdu, C Shekhar, V Torbey

Applied Financial Economics | Published : 2007


While shell companies are convenient vehicles for small private firms to go public via a reverse merger, they are also often mentioned in the popular press in conjunction with stock price manipulation. Recently the Securities and Exchange Commission (SEC) has imposed stricter rules on these companies to speed up disclosure of financial information and curb potential abuses. Our article looks at the trading activity around reverse mergers. Clearly, the merger is taken as significant news as the trading activity increases immediately following the merger announcement. This observation suggests that the SEC may have had good reason to speed up the required filings and provide timely information..

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