Markets
David Weiner W-Net

W-Net Fund Finds Few Worthy Reverse Merger Candidates

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At a time when small companies find growth capital difficult to come by, W-Net Fund principal David Weiner says his company has trouble finding operating companies that are ready to go public via the reverse merger route. W-Net is focused on advising small and medium sized companies go public through reverse mergers. W-Net sometimes buys shells and invests in related PIPE transactions. W-Net recently announced a stake in internet marketing specialist ComF5 International (CMFV). The investor has also acquired stakes in hydroponics equipment maker GrowLife (PHOT), Digipath (DIGP), shell W270 (WSTY), privately held Medicus Research and PIPE issuer AtheroNova (AHRO). 

Weiner says W-Net is not a broadly investing hedge fund, but rather a vehicle to allow a few private investors to take a small number of positions in small private and public companies. While W-Net is not seeking to make numerous investments, it is having difficulty finding any qualified reverse merger candidates.

Markets
Biotech

Thinly Traded BioMed Issuers See Favorable Terms

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Conventional wisdom in the private placement market has long held that an issuer’s size and liquidity largely dictate a deal’s structure. The most onerous discounts and warrant coverage are reserved for the smallest and most thinly traded companies, the thinking goes, while the terms improve as an issuer’s size and liquidity grows. 

But a review of unregistered common stock PIPEs and growth equity private placements (GEPPs) over the past year reveals that the rule of thumb has hardly applied to biotech and pharmaceutical issuers. Traditionally companies in these industries have been the most active pursuers of private financings, and findings indicate that some funds are willing to take high risks for high rewards. Using Sagient Research’s growth equity market monitor PlacementTracker, Growth Capital Investor analyzed private financings over 12 months ended Jan. 31.

Markets

ATM, CMPO Opportunities Expand for Growth Companies

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As a growing number of emerging growth capital investors base private placement decisions on fundamentals instead of fast-money arbitrage strategies, small growth companies are reaping the benefits. 

Growth issuers with a market capitalization of less than $1 billion and a share price of at least $1 are raising more capital through equity private placements (EPPs) than traditional PIPEs, and more placement agents are meeting the needs of the smaller companies by expanding at-the-market (ATM) stock sale programs, confidentially-marketed public offerings (CMPOs), and registered direct (RD) deals. In 2012, emerging growth companies completed just 146 traditional unregistered common stock PIPEs to raise $2.9 billion for an average of $19.7 million per deal, according to PlacementTracker, the EPP market monitoring division of Sagient Research. But such issuers raised $4 billion in 95 CMPO transactions for an average deal size of $41.8 million. They also raised $1.1 billion in 65 registered direct placements for a deal average of nearly $17 million. What’s more, growth companies agreed to 62 ATM offerings in 2012 that could raise as much as $3.7 billion.

Markets

Growth Equity Investors Dominate 2012 EPP Market

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Fundamental investment-oriented growth equity investors increasingly replaced trading-oriented funds as leaders in the equity private placement (EPP) market in 2012, marking a changing of the guard in an area of the capital markets critical to the development of emerging growth companies. For the first time since the dawn of the PIPE (private investment in public equity) market in the mid-1990s, a long-only mutual fund manager led the market in total deals and total investment among active investors, usurping the fast-money hedge funds that had long dominated the market. Fidelity Management & Research invested $190.7 million in 45 equity private placements in 2012, making the mutual fund behemoth the leading active investor in the market in both number of deals and total investment, according to market monitor PlacementTracker. But Fidelity was not alone among fundamental-oriented investors making their way up the PIPE ranking lists last year. Of the top 25 investors in the market, at least 10 are generally regarded as long-only, fundamental-focused mutual and venture capital fund managers, including insurance and annuity giant TIAA, Wellington Management, Columbia Management, T. Rowe Price, and Orbimed Advisors.