Are IPOs Good for Early-Stage Companies and Advanced Biofuels?
by Jim Lane (Biofuels Digest) … The Yes view. In addition to the IPO event itself, IPOs enable companies to tap the broad and liquid public finance channel for follow-on equity raises that enable construction of first- and second-commercial plants- and allow the company to tap the bond market at sharply reduced rates compared to the rates enjoyed by private companies.
… The No view. Industrial biotechnology companies should not be in the IPO markets until they have completed their first commercial plants; the value of their technology can be fairly assessed in dollar terms, and the company is generating meaningful revenues and is on a firm path to profitability.
In addition, premature IPOs cause confidence losses for the companies and the sector as a whole when shares do not hold up well in the secondary market – and industrial biotech stocks have taken a drubbing there. Early IPOs cause companies to “go quiet” and lose visibility in their run-up to IPOs – visibility that is critical to their capital and human capital aggregation. Finally, private placements and venture rounds still offer, for those companies that can access strategic investors, attractive pools of capital that, in many cases, exceed those pools raised in IPOs. READ MORE