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Chapter 1 Overview of Backdoor Listing

1.1 Introduction

Backdoor listing means that an unlisted company acquires the controlling stake of a listed company through acquisition, asset swap, etc. This company can then raise funds by issuing additional shares of the listed company, thereby achieving the purpose of listing.

Compared with general enterprises, the biggest advantage of listed companies is that they can raise funds on a large scale in the securities market, thereby promoting the rapid growth of the company's scale. Therefore, the listing qualification of listed companies has become a "rare resource", and the so-called "shell" refers to the listing qualification of listed companies. Since some listed companies have not completely transformed their mechanisms and are not good at business management, their performance is not satisfactory and they have lost the ability to further raise funds in the securities market. In order to make full use of the "shell" resources of listed companies, they must reorganize their assets. Buying a shell and listing through a backdoor listing are two forms of asset restructuring that make fuller use of listing resources. Backdoor listing refers to the parent company (group company) realizing the listing of the parent company by injecting major assets into the listed subsidiary. One of the typical cases of backdoor listing is the "parent" of Johnson & Johnson Group using the "sub" shell.

A private company can be acquired by a listed company, bought out, or merged with a listed company to achieve the purpose of listing. The concept is that in the US stock market, some listed companies have ended their original business operations, but their stocks are still circulating in the public market. Such listed companies are qualified as "Public Shells" (commonly known as "listed shells"). These "Public Shells" still maintain a supervisory relationship with the SEC ("US Securities and Exchange Commission"), and their stocks are still circulating in the stock market.