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In Depth: Public Companies Quarterly
	From the August 13, 1999 print edition

Companies traded over the counter face PR challenges

The reverse merger is a growing trend that has taken a backseat in the media to the ever-popular initial public offering.

In a reverse merger, a publicly traded company acquires a privately held corporation and its assets by issuing stock to the shareholders of the private company. As a result, the shareholders of the private company will become majority owners of the publicly traded corporation, typically controlling 90 to 95 percent of its shares. The entire process is usually completed with the help of professional intermediaries.

A reverse merger can allow a company to go public very quickly with minimal expense. The company avoids spending six to 12 months and hundreds of thousands of dollars on lawyers and brokerage fees with a traditional IPO.

OTC BB COMPANIES

After going public, the company will most likely be traded over the counter on the OTC Bulletin Board. Becoming an OTC BB-listed company has its challenges though.

Companies traded over the counter have not had many of the filing or reporting obligations in the past that companies traded on major exchanges have, so investors usually can't get much information on them.

The liquidity of many OTC BB stocks has also been poor at best, which has occasionally led to stock manipulation, soiling the image of the OTC BB. As a result, most brokers, investment funds or institutional investors haven't been willing or even allowed to recommend or invest in OTC BB-companies.

GAINING ATTENTION

If the mainstream investment community doesn't care about OTC BB-companies, why should the media? Many OTC BB and small Nasdaq Stock Market companies find it hard to gain media attention.

Traditional PR-strategies, from press releases and conference calls to distributing glossy investor kits and investor alerts, rarely work for the almost 10,000 OTC BB publicly traded companies. And if nobody knows about the company, nobody wants to buy its stock. The stock price goes down, and it becomes difficult to raise capital or use stock for acquisitions.

Still, some of these companies have overcome the hurdles and prospered. What they have in common is an active media relations strategy. These companies are: