Reverse takeover shortcut to public listing

Q: Can you explain what a reverse takeover is? — W.B., online

A: The usual way a company goes public is via an initial public offering (IPO), which can be a lengthy and costly process. Some companies opt for a reverse takeover instead, which can be quicker and less expensive. It involves a privately held company buying a controlling stake in a company that's listed on the stock market, in the process becoming a listed company itself. Smaller companies have merged with larger ones via reverse takeovers, too.

Reverse mergers have been executed by plenty of well-known names, such as Occidental Petroleum, Turner Broadcasting, Texas Instruments, Burger King, Jamba Juice and Warren Buffett's Berkshire Hathaway. Even the New York Stock Exchange employed a reverse takeover in going public.

Q: What, exactly, is a "stock dividend"? — D.L., Philadelphia

A: Some public companies regularly pay out some of their excess cash to shareholders in the form of dividends. Not all dividends are paid in cash, though. Companies can choose to reward shareholders with additional shares (or fractions of shares) of stock.

Stock dividends may seem preferable to cash, but when a company increases its share count by issuing additional shares of stock, it's diluting the value of existing shares. Imagine a pizza, where the more slices there are, the smaller each one is. More shares of a company leave each share with a smaller stake in the company. A company might favor stock dividends, though, because it gets to reward shareholders without sacrificing any cash.

Fool’s School: Homebuying tips

When you buy a home, it's likely your biggest purchase ever, and mistakes can be costly. Here are some tips:

• Aim to have as high a credit score as possible, because lenders offer the best interest rates to those with the highest scores. Check your credit records annually for free.

• Don't get the wrong kind of mortgage. There are many different kinds of mortgages — fixed-rate or adjustable-rate, 15-year or 30-year terms, and so on, with interest rates varying widely. Read up on home loans and choose the kind that will serve you best, as one not well-suited to your needs can cost you tens of thousands of dollars more.

• Don't buy more home than you can afford. When planning your purchase, remember taxes, insurance, maintenance and closing costs, as well as your down payment.

• Finally, don't think of your home as a great way to build wealth. Buy a home to live in, and know that real estate markets can be fickle, especially in the short run. In general, homes are not the best paths to wealth.

Name that company

I trace my roots to 1901, when a shoemaker partnered with a Swedish immigrant to open a shoe store in Seattle. (The young Swede had made a fortune in the Klondike Gold Rush.) By 1960, my shop in downtown Seattle (one of eight) was America's biggest shoe store. I added apparel in the 1960s and went public in 1971. Today, I'm a top fashion retailer, with about 380 stores in 40 states and Puerto Rico; I operate in Canada, too. I rake in about $16 billion annually. My ticker symbol reflects my founder's initials. Who am I?

Last week’s answer

I trace my roots to a construction company founded in 1912 in Santa Ana, California. Over the years, I built gas plants, compressor stations, missile silos, oil refineries, offshore drilling rigs, highways, bridges and more. I helped build the Alaska pipeline, too. Today, based in Irving, Texas, I'm a global engineering, construction and maintenance giant, employing more than 56,000 people and raking in more than $19 billion annually. I've been one of Fortune magazine's "World's Most Admired Companies" for 18 years in a row and a "World's Most Ethical Company" (per the Ethisphere Institute) for 12 years. Who am I? (Answer: Fluor)

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