Requirements prior to entering into a reverse merger are the following:
A Private Company will require approval of its stockholders for a merger with a public corporation
Once a company is taken public through a reverse merger the financial markets hold the following future prospects in the capital markets for the new Public Company:
The market value of a Public Company is often substantially higher than a Private Company with the same structure in the same industry
Capital is easier to raise for public companies because the stock has market value and can be traded
The public trading price of the Public Company's securities serves as a benchmark for the offer price of a subsequent public or private securities offering
Acquisitions can be made with stock since publicly traded stock is viewed as currency for mergers and acquisitions
Stock can be issued for officers, directors and consultants
If the stock distribution has included warrants, the new company can receive proceeds from the exercise of those warrants if the trading price of its common stock exceeds the exercise (strike) price of warrants.