A reverse merger is a transaction in which a private company acquires a publicly-traded shell company to become public without a traditional IPO. Also called a reverse takeover (RTO), it merges the private company's operations into the public entity, typically using a dormant public company with little or no operations as the shell. It is the predecessor mechanic to the SPAC structure, was historically used by smaller companies as a cheaper alternative to IPO, and has largely been displaced by SPACs and direct listings in modern practice.
The mechanic: a private company identifies a public shell company (often a former operating company that has shed most of its assets but kept its public listing, or a company specifically cr...