What is a reverse listing?

Reverse listing occurs when a not-listed company acquires a listed company, therefore becoming listed by merging with it. This form of listing is therefore automatic, without requiring the newly listed company to be subject to due diligence processes or listing requirements' checking processes.

Although reverse listing can be a legitimate practice pursued by legitimate businesses, it can also be a way for an illegitimate business to list itself in a renown stock exchange and thus gaining access to a large investor pool. For instances, a fraudulent company can acquire a quasi-bankrupt listed company (shell company) - therefore becoming automatically listed, giving way to its shareholders, with a help of an investment bank or brokerage firm, to sell its shares to incautious investors.