Reverse Takeover - RTO
Definition of 'Reverse Takeover - RTO'
A type of merger used by private companies to become publicly traded without resorting to an initial public offering. Initially, the private company buys enough shares to control a publicly traded company. The private company's shareholder then uses their shares in the private company to exchange for shares in the public company. At this point, the private company has effectively become a publicly traded one.
Also known as a "reverse merger" or "reverse IPO"
Investopedia explains 'Reverse Takeover - RTO'
With this type of merger, the private company does not need to pay the expensive fees associated with arranging an initial public offering. The problem, however, is the company does not acquire any additional funds through the merger and it must have enough funds to complete the transaction on its own.