GHS Helps Itself by Avoiding an IPO

question 96

Essay

GHS Helps Itself by Avoiding an IPO

In 1999, GHS, Inc., a little known supplier of medical devices, engineered a reverse merger to avoid the time-consuming, disclosure-intensive, and costly process of an initial public offering to launch its new internet-based self-help website. GHS spun off its medical operations as a separate company to its shareholders. The remaining shell is being used to launch a ‘‘self-help’’ Website, with self-help guru Anthony Robbins as its CEO. The shell corporation will be financed by $3 million it had on hand as GHS and will receive another $15 million from a private placement. With the inclusion of Anthony Robbins as the first among many brand names in the self-help industry that it hopes to feature on its site, its stock soared from $.75 per share to more than $12 between May and August 1999. Robbins, who did not invest anything in the venture, has stock in the new company valued at $276 million. His contribution to the company is the exclusive online rights to his name, which it will use to develop Internet self-help seminars, chat rooms, and e-commerce sites.
-What are the advantages of employing a reverse merger strategy in this instance?

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Definitions:

Sampling Plan

A detailed outline of how samples will be taken from a population for the purpose of research.

Sample Activity

An operation or series of operations carried out on a sample within a study or experiment.

Operational Procedures

Operational procedures are the documented processes and guidelines that outline the standard operating methods of an organization or a specific process to ensure efficiency and quality.

Systematic Sampling

Systematic sampling is a statistical method involving the selection of elements from an ordered sampling frame, using a fixed periodic interval after a random start, to ensure a representative sample.