Privately-held Shift Technologies will sell publicly-traded Insurance Acquisition a minority stake in the company as part of the transaction.
Insurance Acquisition will also receive an additional six million shares of Class A Shift stock if the stock hits certain price targets over time.
Insurance Acquisition shares jumped 15.3% on the news.
"Shift's mission is to make car purchase and ownership simple. Merging with Insurance Acquisition Corp. is the next step in our evolution and will enhance our ability to scale our operations," Shift co-CEO George Arison said.
"We operate in a massive market and we believe that there is a significant opportunity to continue to rapidly grow our business. We are actively pursuing our growth initiatives as we execute on our vision," Shift co-CEO Toby Russell said.
A reverse merger is the acquisition of a public shell company company by a private company as a cheaper and quicker method of going public, according to the Securities and Exchange Commission.
San Francisco-based Shift is going public shortly after fellow online auto deal Vroom Inc. (VRM) - Get Report did the same on June 9. Vroom debuted at $22 per share and was trading above $53.50 Monday.
Vroom's IPO terms suggested a valuation of about $2.5 billion; as of June 29 that valuation was about $6.2 billion.
Founded in 2013, Shift allows customers to buy, sell and finance cars online, including a "buy it now" option that allows a buyer to purchase a vehicle sight unseen.