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What Do Berkshire Hathaway and WeedMD Have in Common?

May 15, 2017

 (Photo via Pexels)

 

There's a few different ways a company can go public. The most common path to being public in the U.S. for cannabis-related companies is through a reverse merger transactions. These transactions are also commonly referred to as a reverse takeover ("RTOs"). For those who are not so familiar with reverse mergers and RTOs, be sure to check out our beginners' guide to reverse mergers

 

Reverse mergers have been used as an easy alternative to traditional IPOs for years. Despite how long reverse mergers have been around, there is still a stigma around this back-door path to going public. With all of this negative press surrounding reverse mergers, it can be hard for investors to remember the many major companies that have utilized these transactions to become public. 

 

Some of these companies have become so big and so widely followed on Wall Street, that it can be hard to remember how they became public. Here's 5 major companies you probably had no idea went public via reverse merger:

 

1 - The New York Stock Exchange

 

Yes, that's right...the NYSE completed a reverse merger to become a public company. Back in 2005, the private NYSE merged with publicly listed electronic trading firm Archipelago Holdings, to create the publicly traded NYSE Group Inc.

 

In the transaction, NYSE's member-owners were issued 70% of the shares in Archipelago. This was a major turning point in the death of open-outcry trading and electronic trading's rise to prominence. 

 

A few years following that merger, NYSE Group, Inc. merged with Euronext N.V. to form the world's first global stock exchange. Intercontinental Exchange ("ICE") has since merged with NYSE Euronext to create the publicly traded company that still exists today under the coldest symbol of them all (NYSE:ICE)

 

2 - Berkshire Hathaway

 

According to an article in the Financial Times, "the most famous reverse merger is Berkshire Hathaway, the old-school Maine textile manufacturer that was taken over by Warren Buffett when he bought the controlling interest and merged his insurance empire into it."

 

No, that's not a typo...the Warren Buffett's Berkshire Hathaway that we know and love today is a result of a reverse merger. In most cases, the private company's name survives the existing public company's name, but Buffett must have liked something about the quaint textile mill's name.

 

Fast forward to today, Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) has a market capitalization of over $400 billion. 

 

3 - Texas Instruments

 

Remember those big and bulky calculators that your math teacher made you buy? More than likely, they were made by Texas Instruments (NASDAQ:TXN).

 

Had you bought stock in the company instead of the calculator, you'd probably like them a little more. Believe it or not, this company also became publicly traded through a reverse merger transaction.

 

Texas Instruments went public back in 1953 via reverse merger with the Intercontinental Rubber Company. Since then, the company has been making a lot more than just calculators.

 

From submarine detection devices to laser-guided missile systems, Texas Instruments was a major military and defense contractor until selling the unit to Raytheon (NYSE:RTN) in 1997 for billions. 

 

4 - Jamba Juice

 

The tasty juice company you know and love also made its way onto the public markets via reverse merger back in 2003. 

 

Jamba Juice was acquired by a blank check company, called Services Acquisition Corp., for $265 million. Services Acquisition Corp. renamed itself Jamba, Inc. (NASDAQ:JMBA) and still trades publicly on the NASDAQ to this day. 

 

Services Acquisition Corp. was founded by Steven Berrard who, according to The Street, "is a co-founder of AutoNation, a national used car dealership, and a former CEO of Blockbuster, the national video rental chain."

 

In case you were wondering, Blockbuster also went public via reverse-merger. 

 

5 - Burger King 

 

After going private back in 2010, shares of Burger King went public again in 2012 via a reverse merger. 

 

Burger King Holdings, Inc. went public on the "NYSE through a merger with an existing public stock, Justice Holdings, a UK investment firm that previously traded on the LSE." 

 

Following the merger, Justice Holdings changed its name to Burger King Worldwide (NYSE:BKW). Since then, Burger King, has combined with Popeyes Louisiana Kitchen and the Canadian coffee chain Tim Hortons to form Restaurant Brands International (NYSE:QSR). 

 

Conclusion

 

Besides these multinational mega-corporations, there are also handfuls of successful cannabis companies that have used reverse mergers to become public, such as WeedMD, and ABcann. In addition to the many Canadian licensed producers that have gone public via reverse merger, U.S. based Kalyx Development just announced it would be merging into Atlantic Alliance Partnership, a blank check company.

 

Be sure to subscribe to one or more of our free newsletters so you never miss an important cannabis update. Also, don't forget to connect with The Daily Marijuana Observer on Facebook, Twitter and Instagram.

 

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