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Panda Ethanol Case Study. Purpose of the Case Study. Illustrates how A private firm can use a reverse merger in lieu of an IPO to go public Private investment in public equity (PIPES) may be used to finance ongoing operations following the reverse merger

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Panda Ethanol Case Study

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Panda ethanol case study

Panda Ethanol Case Study


Purpose of the case study

Purpose of the Case Study

Illustrates how

  • A private firm can use a reverse merger in lieu of an IPO to go public

  • Private investment in public equity (PIPES) may be used to finance ongoing operations following the reverse merger

  • Reverse splits can be used to achieve agreed upon ownership distributions

  • Purchasing stock in the prior to a merger proposal can be used to influence the outcome


Key participants

Key Participants

  • Panda Ethanol

  • Grove Street Investors

  • Grove Panda LLC

  • Cirracor


Merger terms

Merger Terms

  • One share of Panda Ethanol common for each share of Cirracor common

  • Cirracor shareholders to own 4% of newly issued and outstanding common stock of the surviving company

  • Panda Ethanol shareholders to own remaining 96%

  • Panda Ethanol to issue 15 million new shares through a private placement valued at $90 million

  • Total Panda Ethanol shares outstanding:

    --13.8 million existing shares

    --15.0 million new shares

  • Total Cirracor shares outstanding: 3.5 million


Applying reverse splits

Applying Reverse Splits


Discussion questions

Discussion Questions

  • Discuss the pros and cons of a reverse merger versus an initial public offering for taking a company public.

  • Why did Panda Ethanol undertake a private equity placement totaling $90 million shortly before implementing the reverse split?

  • How were the Panda Grove investment holdings used to influence the outcome of the proposed merger?


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