Season of Renewal

Ah Spring. The time for flowers, new relationships, new beginnings. When enjoying a warm, sunny day can elevate one’s outlook and mood. For those of us who suffer cold and snowy winters (yes I know you folks in Canada have it rougher than us in New York), it is indeed a wonderful relief to hear the birds singing and my kids’ cabin fever finally broken as T-ball, soccer and playgrounds all come back to life.

Not to stretch an analogy, but I feel the RM world has entered its Spring. Some have begun to call this the beginning of the “heyday” of alternative methods of taking companies public and providing financing. To me the door was slammed shut on RM’s difficult past when Goldman Sachs recently announced that they are underwriting a SPAC. Citibank, Wachovia and others financing their operations with multi-billion dollar PIPEs. More and more calls to me from large firm lawyers taking venture and private-equity backed companies through reverse mergers with valuations well over $100 million. The IPO market completely shut down, leaving companies that could benefit from being publicly held with no other way to get there. Even the SEC getting into the game by easing the regulatory burden on smaller public companies to enhance the process of capital formation by reducing the Rule 144 holding period and other changes.

As many of us get ready to head to Los Angeles in June for the Reverse Merger Conference, the largest and most prestigious RM conference of the year (though there are a number of other excellent conferences as well), we can pause and possibly even allow ourselves a small victory lap around the Millennium Biltmore Hotel where it will be held.

Just a small one, though. Unlike some of my law clients and friends on Wall Street, while I am a supreme optimist, I worry when any trend heats up too much and too fast. How many of us said, “The Internet boom could last forever.” “Real estate prices could continue to rise indefinitely.” “Biotech stocks have no place to go but up.” “We have defeated the business cycle.” Those of us that have been around the block a few times (or the Millennium Biltmore) know that everything in business has cycles.

That said, I have enjoyed the fact that, for the most part, the RM and PIPE worlds are not market-sensitive or cyclical. Our business in both areas have steadily grown each year since the early 2000s. Indeed I was doing many reverse mergers during the Internet boom of the late 1990s, when companies could complete IPOs very easily. The problem then – some companies wanted to be public even faster than the six months or so it took to complete an IPO. So reverse mergers are an attractive alternative regardless of market conditions or the state of the IPO market.

As a entrepreneur, I am always shooting for the sky. Over time, however, watching myself and clients and friends, I have learned that the old adage “slow and steady wins the race” also can be a very successful, very lucrative way to approach one’s business philosophy. I do believe that the RM world is not seeing a “bubble” which could burst disastrously as with the Internet boom, but much more of a slow and steady growth. Let’s do our best to keep shooting for the sky while keeping our feet on the ground. But a nice little smile on a nice Spring day we have earned.

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