Markets
Biotech

Focus on IPOs Dents Life Science EPP Dollar Volume

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In a year shaping up to be known as “life science bulls gone wild,” a fervor that has fueled a gusher of initial public offerings and rising stock prices, publicly traded growth companies in the industry will end 2013 with fewer equity private placement dollars despite brisk deal making. Biotech and pharmaceutical companies raised $2.7 billion in 120 growth EPP transactions for an average of $22.5 million per deal through early December in 2013, according to PlacementTracker, a service of Sagient Research. That’s a substantial decrease from the $4.1 billion that the issuers raised in 134 placements for an average of $30.6 million in all of 2012. (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. The data includes only growth companies that have market capitalizations from $10 million to $1 billion and a share price of at least $1 at closing.)

Follow-on offerings also have outpaced private placements: Biotech and pharmaceutical issuers have raised nearly $2 billion in 33 transactions this year versus $887 million in 16 deals in 2012, according to PlacementTracker. Yet biotech and pharmaceutical issuers continued to increase their use of at-the-market offerings in 2013, giving them more flexibility to raise cash in the coming months.

Deals

Rosenfeld Brings Fourth SPAC to Market with $84M IPO of Quartet Merger Corp.

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SPAC sponsor Eric Rosenfeld has successfully completed the initial public offering of his fourth special purpose acquisition company, with the $84 million offering of the aptly named Quartet Merger Corp. (QTETU) last week. Quartet sold 8.4 million units consisting of a class A common share and one-tenth of a class B share at $10 each. The class B shares convert to an equivalent amount of class A shares upon completion of a merger with an operating company. The unit structure is somewhat unique in that it does not include any warrants, which can significantly dilute common shareholders upon exercise.

Markets
Tim Keating

Keating Debunks the Myth of the IPO Window

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When investment bankers tell executives of emerging growth companies that the time is not right to go public because the IPO “window” is “closed,” they are saying more about their appetite and capacity to do the deal than they are about market conditions. That’s the conclusion drawn in a recent white paper released by Keating Investments’ president Tim Keating that analyzed IPO closing dates over the past 12 ½ years and found that IPOs are regularly closed during 41 out of 52 weeks of the year, or 79% of the time. The paper, “IPO Window: Open 79% of the Time,” is the latest in a series of essays Keating has penned in recent months challenging the conventional wisdom of the emerging growth capital markets, ranging from the lack of equity research for newly public companies to the supposed value a bulge-bracket investment bank brings to an initial offering. Keating analyzed 1,626 IPOs over 652 weeks from January 1, 2001 to June 30. In the average year at least one IPO was closed in 41 out of the 52 possible weeks.

News

Clinton Group Registers New SPAC for $143.75M IPO

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Private equity and alternative investment fund manager Clinton Group is sponsoring a second special purpose acquisition company (SPAC) on the heels of its successful $420 million acquisition of EveryWare Global (EVRY) in late May. Since Clinton Group’s ROI Acquisition Corp. I closed the reverse merger with the Ohio-based cookware manufacturer shareholders have enjoyed a 30% rise in its shares over ROI’s $10 initial offering price. ROI Acquisition II plans to raise $143.75 million to place into trust while it pursues a merger target. SPAC has not disclosed a preference, but given the track records and experience of the Clinton Group execs heading up the blank check company, the same team that managed ROI I, consumer goods and services valued between $300 and $600 million are likely to play a role.