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Market and Sector Type:: Banking & Finance
Article Type:: Quick Guides

What is a cash shell?

Article Date: May 21 2009

We explain the meaning of the terms 'cash shell' and 'reverse takeover'.

Cash shell
A cash shell consists of a company name, a stock market listing, a director or two and a lump of cash in the bank. Sometimes divided into ‘clean’ or ‘dirty’, the former are purpose-built to buy suitable companies in certain sectors, while the latter are companies where a previous business was sold and there is nothing left apart from the remains of their bank balance and some possibly troublesome shareholders.

Reverse takeover
This is the process by which a smaller, listed company (usually a shell) takes over a larger private company, but in effect the larger company ends up in control. It is a supposedly easier route to listing for the private company. The private company can be said to have ‘reversed into’ the public company and the public company has ‘taken over’ the other.

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