What is a Reverse Takeover (RTO)?

A reverse takeover or commonly referred to as an "RTO" is the most popular mechanism to take a private company, public in Canada.


An RTO is completed by a private company merging with a public "shell company." These shell companies are often public companies that are no longer active and are essentially "dead." When the new private business merges with the shell it brings the shell "back to life."


What to look for in a shell company:

  1. Who are the major shareholders?

  2. How much cash is in the shell?

  3. How much debt is in the shell? How much of that is owed to management?

  4. How many shares are outstanding?

  5. How many options are outstanding?


These are just a few of the most important questions one might ask.


Once the private business and the shell have entered into an agreement, the "RTO" process commences with either the TSXV or CSE.


Steps:

  1. Sign LOI between the private company and the shell

  2. 2-year financial audit of the private company (1-1.5 months)

  3. Lawyers to complete the transaction (2 months)

  4. TSX or CSE approval

  5. Go Public!

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