acquisition/merger - basic help please

I

Imagine

hope someone can explain the following to me:


you have an otccb stock:tglc, no revenue, no cash, a shady history and notes receivables that are to be paid in 2010 for the amount of 3.25 million usd. Shares outstanding are 5.9 million. Trading currently at 89 cents.

The above company is acquiring an "established" trading platform company which has been in existance since 1997. Tradestream global - many some of you have heard of it?

otcbb press release that the acquiring company will get 10 million shares plus 1 million preferred shares when the deal closes in 60 days. Due diligence is yet to be done. On this press release the share price of the otccb increases over 100% in 2 trading days.

My questions are:

How can they already determine the number of shares if they will not know the price in 60 days?

How does the "acquired" company make money on this deal?

The new company in itself does not gain as any future sales of shares go to the individuals not the company itself?

Current shareholders win due to the quick pop of 100%, so can you assume that the 89 cents is way undervalued?

Thanks in advance
 
If you post a link to any news on this merger I'll review it and see if I can come up with some answers for you...

Thanks,

-Teg-
 
How can they already determine the number of shares if they will not know the price in 60 days?

How does the "acquired" company make money on this deal?

The new company in itself does not gain as any future sales of shares go to the individuals not the company itself?

Current shareholders win due to the quick pop of 100%, so can you assume that the 89 cents is way undervalued?
More...


I'm having troubles looking up information on Vianet Technology Group Limited, but here is my guess as to what happened.

Tradestream AG is a private company that is doing very well, and wants to get listed on the OTCBB. Instead of going through the hassle of meeting all the listing requirements and the regulatory approval process, they shopped around for a shell company that was currently listed, but was not really an actual company, just a structure. They bought that company, changed the name to Tradestream Global Corp and then issued the intent to buy Tradestream AG. Specifically here are my guesses to your questions:

1. The number of shares has nothing to do with the price, simply the structure of what they want the new company to look like, ie float size, management's shares and whatnot.

2. The aquired company doesn't need to make money on the deal, because essentially they are one and the same as the purchasing company.

3. I'm not sure what you mean by this, the company will profit as all companies that go public do because they hold a large number of shares for themselves, which they got for free. As long as the price is above $0, they have raised capital.

4. You have to evaluate the company based on Tradestream AG's financials. The original company was just a shell and has nothing to do with the current evaluation. The quick pop was probably people familiar with Tradestream AG who have belief in the company and wanted to get in as soon as it was listed.

Again, I'm no expert, and this is total speculation, but I do know that this type of deal goes on quite frequently (having been a part of a company that was trying to do it). There's a name for this type of merger, but it escapes me now. Backed-in merger or something like that, I have no idea. If I can remember it I'll look it up and see if I can post some info on it.

Hope this helps in some way!
 
Ha, I was sure it wasn't a "reverse merger", but I guess it is.

"Another type of acquisition is a reverse merger, a deal that enables a private company to get publicly-listed in a relatively short time period. A reverse merger occurs when a private company that has strong prospects and is eager to raise financing buys a publicly-listed shell company, usually one with no business and limited assets. The private company reverse merges into the public company, and together they become an entirely new public corporation with tradable shares."

That's taken from here:

http://www.investopedia.com/university/mergers/mergers1.asp

Hope that helps!

-Teg-
 
it's a reverse merger. they were scams until the NYSE pulled one, now they're legit.

it's a pump and dump operation, vertically integrated. the penny stock, I mean (freudian slip?).
 
If it was a reverse merger than I wouldn't be as confused, but in my humble opinion this is not a typical reverse merger

the wording in the press releases is different than the wording for a typical reverse merger

furthermore, the otccb company has already issued an incentive option scheme

to me and knowing a little history about this amazingly scam company, i am convinced that this is simply not a reverse merger

thus my questions in the first post

appreciate your effort on this
 
Ok, then I'm afraid I won't be much help, unfortunately. To me, it definately looks like a reverse merger, because the listed company was a shell company, changed it's name to the purchased companies name, and bought the company. Again, tho, I'm not an expert....

Good luck finding the information you need tho, I'm sure someone on here knows more about it.

Thanks,

-Teg-
 
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