Why Go Public in this Market?
By David Feldman at 2 June, 2009, 6:30 am
The panel I will lead at the Reverse Merger Conference in Las Vegas next week is titled, “Why do a Reverse Merger in this Market?” While that is the title, my fellow panelists and I have decided the real title is “Why Go Public in this Market?” While I’m not going to give away all the sage advice to be proffered by the great group of speakers who will join me, I will give you a little taste.
It really is simply. Going public without an IPO is generally not about market conditions on the day or week that you go public. It is true that in an IPO, so much depends on how the market is doing when the underwriters decide to take the issue out. Too much, frankly. Too many great potential IPOs get shelved or have their IPO price slashed simply because the market takes a dip for a week or so around the time of completing the transaction.
So first, “this market” is clearly better than two months ago with a surging Dow Jones and even Russell 2000 index for smallcap stocks. So that is why we are starting to see some IPOs and other secondary public offerings (especially by banks and others trying to raise money to pay off TARP money loaned to them). But if the market takes a dip, well, those will dry up.
But whether good or bad market today, those taking companies public without an IPO try to project the market 12-18 months hence. That is the time that most companies expect to really get trading going. OK maybe some try to reduce that to 6-9 months. But we are seeing reverse mergers and self-filings get completed “in this market,” and that includes last fall, when just my firm completed two reverse mergers, both with financings over $10 million, in the month of October alone.
More companies are going public without a contemporaneous financing, as has been reported by the Reverse Merger Report. At the conference we will cover why this is true, and don’t worry, our panel has already scoped out a number of key current topics to cover as essentially the introductory panel to the best conference of the year. I hope I will see you there!
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