Rappaport is well known in Chinese investment circles for creating his own reverse-merger process, something he calls a WRASP, short for "WestPark Reverse Alternative Senior Exchange Process." The firm has even trademarked the acronym.
The technique is similar to a standard reverse merger, except that it allows for a company to immediately have its equity listed on a major stock exchange, rather than living for some liminal period in the penny-stock purgatory of the OTCBB or the Pink Sheets.
First, WestPark registers a brand-new shell company, as opposed to acquiring one that already exists, according to securities lawyer David Feldman in his seminal text on reverse mergers, Reverse Mergers (Bloomberg Press, 2009). A so-called Form 10 shell, or "virgin shell," the vehicle is a form of "blank-check" entity, albeit one without any shareholders or trading history. Usually, when WestPark conducts the merger between the Form 10 shell and the Chinese company, it will also arrange a private placement, selling stock in the still-private company to a small group of investors. After registration statements are filed, and either the Amex or Nasdaq approves the stock's listing, WestPark (sometimes joining with other, larger banks) will underwrite a public offering of shares, according Feldman's text and WestPark's own description of the process. As such, WestPark says, a WRASP has as much regulatory oversight as an IPO.
"It is a complete misconception to classify these transactions as 'backdoor' reverse mergers," WestPark said in a statement sent to
TheStreet in response to a list of queries for this story. "Unlike the backdoor listing model," the firm continued, "the WRASP process requires our client companies to undergo full SEC review, subject themselves to diligence by the respective exchange, be declared effective by the SEC and receive an NOL
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