Back Door Listing

What is 'Back Door Listing'

A strategy of going public used by a company that fails to meet the criteria for listing on a stock exchange. To get onto the exchange, the company desiring to go public acquires an already listed company.

Explaining 'Back Door Listing'

Believe it or not, purchasing a public company can be a cost-effective way for some firms to go public.

Further Reading

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… the issue of why private firms choose to go public through the backdoor rather than the front door, a sample … starting in 1999, backdoor listing activity increased on the asX … during the last year (2007), the number of transactions dropped back to seven, which is similar to pre- 1999 … ‏

Q&A About Back Door Listing

Why would it be cost-effective for some firms to use this method?

It can be cheaper than other methods, especially if there is no need for additional capital.

How does a company go public using this strategy?

The company acquires an already listed company.

What are some advantages and disadvantages of this method?

There are many advantages, but also some disadvantages.

What are the benefits of using this method?

Some companies may not have enough money or assets to raise funds in order to go public, so they buy another firm that has already been listed on an exchange. This allows them access to the market without having to raise any additional capital themselves. They do not have to pay any fees associated with raising new capital and they can get their shares out into circulation much more quickly than if they had gone through the process of being listed from scratch. However, there are also drawbacks associated with back door listing as well as other methods of going public such as initial public offering (IPO). For example, back door listing requires management time and effort which could otherwise be spent running the business; there is always uncertainty about whether or not investors will accept your shares; you may lose control over your business; and you may find yourself liable for lawsuits from shareholders who feel that their interests were not looked after properly during the acquisition process.""

What is Back Door Listing?

A strategy of going public used by a company that fails to meet the criteria for listing on a stock exchange.