RM Deals Since November: Could be Worse
By David Feldman at 15 March, 2009, 8:07 am
According to the newest issue of the Reverse Merger Report, there have been a total of 44 reverse mergers from November to February. This is about a 1/3 reduction from the height when over 200 deals a year were being done. Worse, the RMR reported that February was the first month since September 2005 that not a single reverse merger included a contemporaneous PIPE financing. In other words, the 14 companies that completed reverse mergers in February all went public without raising money at this time. And the total market capitalization of February’s deals: all of $55 million in total. January’s deals were valued at $236 million. Even the deals before February that raised money raised very little. One with $250,000, another with $380,000 and yes one with $10 million.
So what’s going on? Duh. The stock market sucks. Smallcaps tend to drop lower when things are bad and fly higher when things are good. The cataclysmic changes in the market and economy are obviously affecting things. The PIPE market is practically at a standstill, though “registered direct” offerings for companies on higher exchanges are somewhat active. But it shocked me that my firm, which completed nearly 90 PIPE deals for investors and placement agents last year, completed only one PIPE deal in January (the #1 law firm that month only did 3 deals!).
Could it be worse? Yep. Deals are down one-third, but not out. Chinese companies continue to go public. Players like WestPark Capital are out there actively signing deals and getting stocks trading. PIPE investors are going to have to get back in the game soon. Many companies can benefit from being publicly held despite the current conditions and are just waiting for the opportunity. With due respect to my friend Tim Keating, I think the glass remains at least half-full in terms of optimism for the months ahead. Hey maybe it will be RM that helps bring the entire capital markets world back to its feet. Given the great week in the market last week, who knows…..
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