So Where are We? The RM Trends as of the Moment…
By David Feldman at 4 March, 2009, 5:14 am
As I’m writing the second edition of my book, expected to come out later this year, I am looking at current trends in the marketplace. Here are some of them that I am seeing:
1. For the first time, some venture capital firms putting their toes in the water as investors in PIPEs and considering taking their portfolio companies public through reverse mergers and other IPO alternatives.
2. More interest in pursuing deal opportunities outside of the United States and China – in Latin and South America, Europe and other Asian countries. Need for capital and lackluster trading overseas are leading causes.
3. Some folks moving more towards self-filing opportunities than direct shell mergers where a financier is willing to finance the private company as it waits for the self-filing to be completed. This may change back if the SEC reverses the so-called “evergreen” requirement for a former shell to have been current in its SEC filings for a shareholder to utilize Rule 144 to sell shares.
4. SPAC-meisters licking their wounds (though some also counting their money made) but beginning to plan what will be next.
5. More shell companies sold in “cash and carry” transactions where shell owners are removed as shareholders but paid off rather than allowing them to retain equity. Particularly common in Form 10 shell mergers.
6. Hope remaining that the evergreen requirement will be reversed and that a new conversation will commence about the future of Rule 419 and its restrictions on taking shell companies public.
7. Rule 144 changes from last year all but eliminating the old Rule 415 problems in most transactions for already public companies, but not entirely in shell merger situations where holding periods remain longer. More and more PIPE deals actually eliminating registrations altogether where a 6-month hold applies.
8. WestPark Capital’s WRASP structure has been succeeding and has the opportunity to help transform the industry to utilize clean SEC-favored Form 10 shells working with successful growing companies to complete a PIPE then move immediately to trading on the NYSE Afternext (formerly American Stock Exchange). [Disclaimer: my client.]
9. Legal and auditing fees and shell prices all dropping, in some cases significantly, from levels seen even just six months ago – good for issuers and investors, not so good for shell owners and service providers.
10. As of now, real talk about real deals getting started much more so than 1-2 months ago. The “money on the sidelines” is starting its stretching exercises and getting ready to get in the game.
So that is your snapshot as we continue to slog through these tough times. The good news: as I meet with my contacts in lunch after lunch, those who we care about and who care about us are saying: let’s work together, let’s help each other, we will get through this, let’s make more of an effort to be there for one another. I know now how important it was to take the time I did over the last 23 years of law practice to build, maintain and care about my friends and colleagues in the business world. Know that I will always be there for you, and that includes all my loyal blogees!
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