We give a definition of cash shell and explain the meaning of reverse takeover.
A cash shell consists of a company name, a stock market listing, a director or two and a lump of cash in the bank. Sometimes divided into ‘clean’ or ‘dirty’, the former are purpose-built to buy suitable companies in certain sectors, while the latter are companies where a previous business was sold and there is nothing left apart from the remains of their bank balance and some possibly troublesome shareholders.
This is the process by which a smaller, listed company (usually a shell) takes over a larger private company, but in effect the larger company ends up in control. It is a supposedly easier route to listing for the private company. The private company can be said to have ‘reversed into’ the public company and the public company has ‘taken over’ the other.
Cash Shells Directory 2012
Our latest research reveals that there were 64 shells holding £237.9 million quoted on AIM, PLUS and the Main Market in 2012.