Ignorant question: why do biotech companies IPO so early? (Often before their first drug is in the clinic). I would have thought that would be a costly process for a company still facing serious technical risk ahead.
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Many proper Biotech IPO are liquidity events for VC/PE funds. Who can capture a large slug of value and sell into hyped markets.
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Hm. I’m suspicious that this is more valuable for companies that have less well-placed confidence in their scientific merit, right? If I knew I had something great, I’d rather get investment from super-experienced VCs (who do due diligence) than public markets. Or am I wrong?
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Banking and legal fees usually amount to small beer relatively speaking. Costs are basically baked in and partially passed along to buyers of the offering
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For obvious reasons, legacy institutional investors and mgmt enjoy the enhanced liquidity and stock appreciation that frequently follow. Investment banks go on road shows and firm up demand for the issuance beforehand.
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A number of biotechs do reverse mergers, too, btw.
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