SOURCE: DealFlow Media

November 16, 2006 07:30 ET

Reverse Mergers Shrug Off Summer Hiatus to Outpace Traditional IPOs

Aggregate Market Cap Generated by Reverse Mergers Doubled From Last Quarter

PETALUMA, CA -- (MARKET WIRE) -- November 16, 2006 -- More private companies are becoming public through reverse mergers with shells, yet the third quarter saw a 4.3% decrease in completions from the previous quarter and a 12% drop from last year, according to The Reverse Merger Report, a quarterly publication by DealFlow Media that tracks the market for alternative public offerings.

During the third quarter, 44 companies completed reverse mergers with public shells, a drop from the 50 deals completed in last year's third quarter. However, despite this decline, reverse mergers generated the highest aggregate market cap value of any quarter on record, doubling in size. Reverse mergers generated a total market cap value of $3.4 billion, a 103% increase from last quarter's $1.67 billion and 160% larger than the $1.3 billion market cap from last year's third quarter.

The number of reverse mergers continues to eclipse IPOs. There have been 139 reverse mergers compared to 120 IPOs through the end of the quarter, and there were 13 more reverse mergers than IPOs in the third quarter alone. IPOs are also sharply down from the second quarter.

An increase in non-U.S.-based companies continued to use the reverse merger as a means of accessing the U.S. equity markets in the third quarter. Roughly 34% of reverse mergers this quarter involved a non-U.S.-based company. Chinese companies dominated non-U.S. reverse mergers, comprising 80% of the deals.

There were only five specified purpose acquisition corporations (SPACs) public offerings finalized in the third quarter, compared to 13 IPOs in the second quarter. New SPAC offerings raised $1.68 billion in the third quarter, 22% less than the previous quarter, but the average amount raised at IPO during the quarter more than doubled.

Though completions were down, there were 17 new IPO filings by SPACs, making it the fourth most active quarter for new filings since 2003. SPAC IPO filings only decreased slightly from last quarter's 18 filings but plummeted 41% from the year earlier quarter, which had a record 31 filings.

Contact Information