Economical savings in all reverse acquisitions

A lot of people want to enter the stock market because everything is getting high valuation at the moment. All of this is a sign of risk appetite, and reversal acquisitions are the easy way out, but as an investor it is important to ask the right questions, says Frida Pratt, Nordnet savings economist, to Nyhetsbyrån Direkt.

The year has seen a large number of IPOs and the current year does not seem to be rolling back. But in addition to the usual way to ring the bell on the first trading day, more and more people are resorting to reverse takeover tactics.

In short: An unlisted company acquires a listed company’s market after the previous company has recovered its operations and received a number of new shares in the listed company as a payment. Thus the market is filled with unlisted company operations.

In the past week alone, three reversal acquisitions were announced.

Online jewelry company Online Brands announced a reversal takeover of the Cama Group, which sells hats and rugs via e-commerce services. On Tuesday, it was time for Archelon raw materials and IT services company Qlosr, and on Wednesday it was Sealwac’s turn and the Norwegian Maxsnus – venting in and out with watching for seams in plastic bags.

“It is a sign of the times, just like SPAC, and it can be seen that the paths to the stock market are emerging and are not traditional. As an investor, you must ask yourself the question why?” Says Frida Pratt of Nordnet.

From Jonas Norberg, CEO of Qlosr IT Services, who, if all goes as planned, will replace Archelon in NGM, the answer is: time.

“In our case, it really has to do with being a relatively small company that has grown very quickly and for us it is about going very fast and it should cost as little of our time as possible,” he says. To Direkt, he adds that cost issue played a minor role in decision making.

Many believe, however, that the reverse takeover method is a backdoor into the stock market with lower requirements, but it is not an image shared by exchange operators.

“No, there should not be a kitchen road to the stock market. If we think the company is undergoing such major changes that it is considered a new company, it will undergo the same review as it does with regular listing,” says Elias Skog, head of company oversight at Nasdaq Stockholm to Nyhetsbyrån Direkt is supported by Spotlight and NGM colleagues.

According to Anders Erickson, Market Manager at the Spotlight Stockmarket, there is also no financial preference for the way companies move to the place to trade.

“No, we don’t care. There is no difference because we have the same number of employees working with the operation and the company has to pay the listing fee even if it’s a reverse acquisition.”

But for the shareholders of the company that will host the new company, it often plays a bigger role. For the three companies that announced reverse acquisitions this week, prices rose between 100 and 300 per cent on the day of the announcement, and question marks were raised over the essence of the major revaluations regarding the business change.

Frida Pratt, Nordnet economist and economist, points out that even if trading venues do the same checks, the same information is not available to investors as in the normal listing process.

“There isn’t a prospectus like there is in a regular list. Not everyone might read it either, but it still contains a lot of good information. Everything about the IPO helps investors make informed decisions and here you can’t get it,” she says.

The day before Sealwac’s reverse acquisition of Norwegian Maxsnus, the market value was 9.6 million SEK. When the exchange closed the next day, the market value was at just over 38 million SEK. Existing shareholders will receive an 8.5 percent total equity stake in Maxsnus upon completion of the transaction.

As Frida Pratt points out, there is no prospectus, and the press release states that Maxsnu’s sales increased from about 4 million NOK to 45 million NOK in 2020, and full-year sales are expected to increase to 100 million crowns. No result was announced, but a “positive result” for the first quarter was announced.

It is noteworthy that the Net Trading Group, the former owner of Maxnus, sold the company at the beginning of 2020 for 1.2 million SEK.