Markets

Demand for Emerging Growth Issuers Fuels IPO Run

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Initial public offerings are on track to have their best year in a decade as investors display an appetite for riskier bets in emerging growth companies (EGCs). Issuers raised $30.7 billion in 131 IPOs through Aug. 9 this year, according to research firm Dealogic. Over the same period in 2012, only 97 issuers had completed IPOs, although they had raised $32.2 billion in capital. Some of the dollar volume discrepancy could hinge on the market participation of EGCs, which have completed 82% of the IPOs this year and have raised about half of the total proceeds, according to Dealogic.

Markets

Energy Exploration, Medical Device Growth EPP Issuers Buck Post-Deal Price Drops in Q2

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The stock market’s bull run in the first half of 2013 that pushed the Dow Jones Industrial Average and Standard & Poor’s 500 indexes to all time highs failed to influence initial investor reaction to growth equity private placements (EPPs). Looking at stock price performance on an industry-by-industry basis, investors largely sold on the news of a private deal, and sentiment three days after announcement was frequently more pessimistic than the response over the first half of 2013, according to analysis by Growth Capital Investor. Additionally, transaction activity slowed from a year earlier while the average dollar amount fell, according to data provided by PlacementTracker, a division of Sagient Research. Growth EPPs are offerings of a least $1 million of stock or equity-linked debt that feature fixed purchase, conversion and warrant exercise price terms, and that are sold by companies that have market capitalizations from $10 million to $1 billion as well as a share price of at least $1 at closing. The three-day post-announcement stock performance data examined excluded rights offerings, at-the-market offerings and structured equity lines.

Deals

William Blair Fund Invests in Nanosphere

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William Blair’s $5 million investment in Nanosphere (NSPH) provides another illustration of growth capital fund activity in the equity private placement market, where Nanosphere sold stock in a registered direct offering as part of a $27 million debt and equity financing. Craig-Hallum Capital Group was the sole bookrunner for the underwritten transaction, and William Blair Small Cap Growth Fund was the investor. Craig-Hallum has served as agent for 62 EPPs that raised $1 billion since 1999. The transaction closed on May 8. The Blair fund joins earlier investors in Nanosphere including Frontier Capital Management, TFS Capital Cortina Asset Management, Granahan Investment Management, and Bain Capital Venture Investors.

Deals

Venture-backed Baxano Goes Public in $23M APO with TransS1

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Venture capital and PIPE financing joined forces as two spinal therapy companies agreed to merge in a deal that made privately held Baxano the successor of publicly traded TranS1 (TSON). TranS1 paid for the merger with $550,000 in cash and 10.4 million shares of stock worth about $23 million. The deal also calls for the refinancing of $3 million in Baxano debt. The transaction was approved by shareholders on March 3 and is expected close early in the second quarter. The transaction is the largest reverse merger and PIPE combination, referred to as an alternative public offering or "APO", since BioCryst Pharmaceuticals (BCRX) became public in a $25 million APO in October 2012.