A trading shell is a shell company whose common stock may be publicly bough and sold on an established market (organized exchange). A trading shell’s stock must have already been listed. Trading shells are usually existing publicly traded companies that have gone out of business due to operating or financial difficulties. These companies may or may not still be active and may or may not be current in their document filings.

Many can also be on the verge of bankruptcy or have significant outstanding liabilities. Newly formed shells, except SPACs, generally do not and cannot have their stock listed unless they have been subject to a merger. Public shells (publicly traded shells) formed from existing public operating businesses typically have their stock traded. The market for shells views trading as a positive sign, and generally values a trading shell higher than whose stock is not trading. Though acquiring trading shells may save some of the time required for formation or avoid the registration process, an investor may be exposed to a larger risk in shouldering past problems and outstanding liabilities.

On the other hand, a non-trading shell is a shell company whose common stocks do not trade or cannot trade until after a reverse merger. While legally a public company, a non-trading shell is not listed or approved for trading on an established market (organized exchange). Non-trading shells are typically not subject to the risks of unjustifiably downward pressure and insider trading. Also, these shells have only a narrow base of shareholders.