CHAPTER 9Troubled Industry: China, Seasoning Rules, Bogus Shells
Rereading the second edition of my book, Reverse Mergers, in preparation for this effort, I realized how dramatically the world of shell mergers has changed since its 2009 publication. The market was frenzied and largely unsupervised by the regulators. Many exciting and legitimate deals had been completed, including quite a number of life‐sciences companies such as Puma Biotechnology. That company completed a reverse merger with a Form 10 shell in 2006 and sold to Johnson & Johnson just three years later for almost a billion dollars.
Some SPAC successes had been riding high around 2009 as well, including Jamba Juice and American Apparel, though the SPAC market then was taking a pause right after the 2008 market meltdown. Our work to enhance the legitimacy and transparency of these transactions was truly bearing fruit, and Wall Street had come around.
At the same time, however, the stock market in general hit a nadir in early 2009 as the country was still reeling from the economic and market calamity in the second half of 2008. It was around this time that my second edition came out. It seemed at the time, however, that the shell merger market would get through it, Chinese deals were continuing, and frankly the SEC had done little to stop the questionable players at that time. This was not good for legitimacy but did increase the numbers of mergers and financings being completed.
Also around that time the seeds ...