The latest IPO window has stalled. There have been five IPO withdrawals since June and around 30 since 2005. Global macro events are threatening to completely shut it.
Reverse mergers have become an increasingly popular option with eight transactions in the last year. Unfortunately, 47 percent of reverse mergers have decreased in value post-close since 2008.
At the 2011 BIO Investor Forum, a panel of experts examined the current financing environment and what private executive teams need to be aware of as they pursue the public path.
“I always get very nervous, as a board member, if I hear one of the venture capitalists, or someone on the board say, ‘Hey we can’t get public, let’s do a reverse,” Mark Beer, president and CEO of Aegerion Pharmaceuticals, said. “I think certain companies deserve to be public and certain companies don’t deserve to be public.”
While he recognizes that the reverse may be a cleaner way to go public, Beer said that if a company isn’t ready to go public it will get crushed either way.
In other words, the market is rational and if a company isn’t ready to go public a reverse merger isn’t the answer.