Rto12 Oct 2017 14:39
A few words on RTOs
‘In comparison with a normal IPO, a reverse transaction is lower risk,’ says BDO’s Prince. ‘You don’t need to rely on investors to pump in money so in that way it’s easier. Although it shouldn’t be seen as a cheap option, for people who are thinking of doing an IPO, we’ll say the costs of reversing into a cash shell are roughly the same.’
However, the lumps of cash sitting on the balance sheet of most of these vehicles should be an added attraction. Prince suggests that in the current environment, with the markets in the doldrums, prospective reversees may even be able to drive a bargain deal and complete a transaction at a discount to the net assets of the shell: ‘There are quite a few shells out there, so you could push for a valuation lower than market value.’