Reverse Takeover - RTO

AAA

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.

VIDEO

RELATED TERMS
  1. Takeover

    A corporate action where an acquiring company makes a bid for ...
  2. NYSE Arca

    A securities exchange in the U.S. on which stocks and options ...
  3. Back Door Listing

    A strategy of going public used by a company that fails to meet ...
  4. Golden Parachute

    Substantial benefits given to a top executive (or top executives) ...
  5. Merger

    The combining of two or more companies, generally by offering ...
  6. Public Company

    A company that has issued securities through an initial public ...
Related Articles
  1. Mergers And Acquisitions: Understanding ...
    Fundamental Analysis

    Mergers And Acquisitions: Understanding ...

  2. SPACs Raise Corporate Capital
    Investing

    SPACs Raise Corporate Capital

  3. The Wonderful World Of Mergers
    Insurance

    The Wonderful World Of Mergers

  4. A Guide To Spotting A Reverse Merger ...
    Investing

    A Guide To Spotting A Reverse Merger ...

comments powered by Disqus
Hot Definitions
  1. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  2. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  3. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  4. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  5. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
  6. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
Trading Center