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Alternative Public Offering

(APO) Somewhat misleading term used to refer to the variety of methods of going public other than an IPO. The term generally describes reverse mergers, self-filings, Rule 504 offerings, and Regulation A offerings; however, a number of these methods do not include public offerings, which is why the term is somewhat misleading.

Additional Comments:

There are two parts that comprise an APO; the reverse merger and the Private Investment of Public Equity (PIPE). In the reverse merger, the private company becomes public by merging with or being acquired by a public “shell” company. The shell company is a public company that has no assets or liabilities. When the private company and public shell merge together, the combined entity thereafter trades under the previously private company’s name rather than the shell company’s name as it did before.

What differentiates an APO from a reverse merger is the simultaneous PIPE raise. A PIPE is when a publicly traded company sells its stock to investors in a privately negotiated transaction. The stock is normally sold at a discount to current market value and investors are normally acquiring unregistered “restricted” stock. The typical PIPE investor is an institutional investor such as a hedge fund or mutual fund. PIPEs are usually completed by investment banks who act as “Placement Agent” in the transaction.

Related Terms:

Backdoor Registration
A method by which a company's shares can become publicly tradable through a merger directly with ...

Cash-and-Carry Shell
A shell company whose owners wish to sell most or all of the shell's ownership for ...

Clean Shell
A shell company which has no liabilities or other negative attributes as perceived by an operating ...

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