Practising Law Institute’s Exempt and Hybrid Securities Offerings is the first practical, accessible resource to provide you with comprehensive legal, regulatory, and procedural guidance regarding these increasingly popular offering methodologies.

Authored by Morrison & Foerster Partners Anna Pinedo and James Tanenbaum, the third edition of Exempt and Hybrid Securities Offerings gives you a useful understanding of the applicable regulations and legal framework for these transactions, as well as the implications of these regulations for structuring transactions.

The treatise provides a detailed analysis of the regulations and guidance affecting exempt and hybrid securities offerings, as well as offers market context and practical structuring advice. Packed with checklists, transactional timelines, SEC guidance, and a wealth of labor-saving sample documents, Exempt and Hybrid Securities Offerings offers the relative advantages and drawbacks of the most commonly used forms of exempt and hybrid offerings. It clearly explains:

  • conducting venture private placements;
  • traditional and structured PIPE transactions;
  • institutional (debt) private placements;
  • Rule 144A offerings;
  • Regulation S offerings;
  • Regulation A offerings and crowdfunding;
  • shelf takedowns;
  • registered direct and ATM offerings;
  • confidentially marketed public offerings; and
  • continuous issuance programs, including MTN and CP programs.

This comprehensive three-volume treatise, with useful forms, has been updated to reflect changes brought about by the Dodd-Frank Act, the JOBS Act, the FAST Act, and other recent regulatory changes.

For more information, please click here.

Wednesday, October 18, 2017

Morrison & Foerster LLP
250 West 55th Street
New York, NY 10019

Lunch and Registration:
12:00 p.m. – 12:30 p.m.

Keynote and Pitch:
12:30 p.m. – 1:30 p.m.

Closing Words and Dessert:
1:30 p.m. – 2:00 p.m.

OurCrowd and Morrison & Foerster Seminar

It’s no secret that Israel has been leading the world of innovation. VCs and financial backers from every industry flock to Israel, the Startup Nation, which has the highest number of startups per capita in the world, and ranks fourth in NASDAQ listings, just behind the U.S., China, and Canada.

Join OurCrowd, Morrison & Foerster, and the startup community for a lunch program discussing financing alternatives and opportunities for Israeli startups.

Speakers:

  • Jon Medved
    Founder & CEO, OurCrowd
  • Omer Keilaf
    CEO & Co-Founder, Innoviz
  • James Tanenbaum
    Partner, Morrison & Foerster LLP

This is an in-person only session.

For more information, or to register, please click here.

Since 2004, the number of companies valued at over $1 billion, known as unicorns, has grown exponentially.  Pitchbook’s recently published Unicorn Report notes that unicorns currently make up one-fifth of 2017’s total deal value. There are currently 176 U.S.-based companies that are classified as unicorns.  While the number of unicorns has increased, the number of financings and average deal size has declined.  In 2017, to date, there have been 43 financings for U.S.-based unicorns, raising $10 billion.  Last year, unicorns raised $18.2 billion in 68 deals and 2015 saw 118 deals raising $20.4 billion.

There are 17 companies that achieved unicorn status in the U.S. during 2017, to date.  On average, it took 6.7 years for these companies to reach unicorn status since their founding.  Looking at all U.S. unicorns, the companies have an average age of 8.8 years.

As more companies are electing to remain private for a number of reasons, including the costs associated with going public and remaining a public company, unicorn exits are scarce.  In 2017, to date, there have been eight exits by unicorns valued at $8.7 billion.  In 2016, there were 10 exits valued at $15.6 billion.  This year, two unicorns were acquired and five went public.

Access Pitchbook’s Unicorn Report here: https://pitchbook.com/news/reports/2017-unicorn-report.

Global fintech venture capital-backed financings are on course to hit record highs, according to a recent research briefing by CB Insights. For the first half of 2017, there have been 496 VC-backed financings that raised over $8.0 billion for fintech companies around the world. U.S. fintech issuers represented almost 40% of the total number of fintech financings in the first half of the year with 198 deals raising $3.1 billion.

Financings for blockchain and bitcoin companies globally in the first half of 2017 raised $343 million over 36 deals. Wealth tech company financings, which include robo-advisors and mobile investing platforms, raised $661 million across 33 financings. Financings for insurance tech companies accounted for over 15% of financings by number of deals, raising $826 million over 76 deals.

There are now 26 fintech unicorns, companies with a valuation of over $1 billion, which include 15 U.S.-based fintech companies. This follows an ongoing trend of privately held companies choosing to remain private longer. Late-stage investments have been ever more present with companies going through multiple rounds of financings due to increased access to capital. Both global and U.S. late-stage investments in fintech companies hit five-quarter highs, with a median deal size of $34 million and $38.5 million, respectively.

To see CB Insight’s full report, click here.

Wednesday, April 26, 2017
11:00 a.m. – 12:30 p.m. EDT

After the 2016 decline in the number of U.S. initial public offerings (IPOs), commentators questioned whether the trend toward companies deferring initial public offerings and remaining private longer would be a new norm.  Already this year’s IPO market appears to be rebounding.  During the session, the presenters will discuss:

  • Whether cross-over (or late stage) private rounds still remain an important milestone on the road to the IPO;
  • U.S. IPO activity (sectors, VC- and PE-backed companies, foreign private issuer activity, syndicate structures);
  • Disclosure and governance trends among IPO issuers;
  • Dual track processes and the legal and business considerations;
  • Multiple share classes; and
  • Other developments.

Speakers:

CLE credit is pending for California and New York.

For more information, or to register, please click here.

During 2016, there were relatively few companies that completed initial public offerings (“IPOs”). Some commentators attribute the dearth of IPOs in 2016 to volatility arising from, among other things, Brexit and the U.S. Presidential election. Others point to the continuing trend of successful companies remaining private longer and continuing to benefit from attractive valuations in private financing rounds without facing the burdens associated with becoming Securities and Exchange Commission (“SEC”)-reporting companies.

In this year’s survey, we consider the characteristics of the emerging growth companies (“EGCs”) that completed IPOs and the corporate governance, compensation and other practices adopted by them. Specifically, we examined the filings of (i) the approximately 680 EGCs (on an aggregated basis) that completed their IPOs in the period from January 1, 2013, through December 31, 2016, and (ii) the 100 EGCs (on a standalone basis) that completed their IPOs during the year ended December 31, 2016. The survey focuses on EGCs that have availed themselves of the provisions of Title I of the Jumpstart Our Business Startups Act (“JOBS Act”). This year is anticipated to be a more active year for IPOs. Our objective is to provide data that will be useful to you in assessing whether your company’s current or proposed corporate governance practices are consistent with EGC market practice.

Read the 2017 review.

In a recent paper, authors Sergey Chernenko, Josh Lerner, and Yao Zeng consider investments by mutual funds (“cross over funds”) in 99 unicorn companies. Given the rise in recent years of investments by cross over funds in private companies, the authors compare the investments made by these funds compared to those made by venture capital funds. There have been numerous studies examining the role of venture capital funds in governance of private companies and the contribution of venture funds to promoting certain governance practices and information reporting. Not surprisingly, the authors find that more often than not cross over funds structure their investments as straight convertible preferred stock, rather than participating preferred stock. Cross over funds are more focused on cash flow rights, require stronger redemption rights, and generally are not interested in board representation or other roles in the companies. As a result, mutual funds tend not to monitor the governance of the unicorns in which they invest and function more as passive investors, without providing the type of oversight considered characteristic for venture investors. Although late-stage private placement activity declined in 2016, the trend toward companies remaining private longer remains important. As a result, understanding the roles of late-stage investors in unicorns can provide important insights. See the full paper here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2897254

Renaissance Capital reported several record lows in their 2016 Annual Review of the U.S. IPO Market.  A total of 105 IPOs were completed in 2016, raising $18.8 billion in proceeds—the lowest activity level since 2009 and the lowest proceeds level since 2003, respectively.  The median deal size for 2016 IPOs was $95 million, which is attributed to the number of smaller biotech offerings in 2016.  Only four IPOs raised more than $1 billion this year.  Additionally, 2016 had the lowest number of IPO filings since 2009 with just 120 companies filing for an IPO, an almost 50% decrease from 2015.

Sector updates.  The tech sector accounted for 20% of all U.S. IPOs in 2016, with only 21 offerings, raising $3 billion in proceeds.  The lack of tech sector participation in the IPO market is attributed to the public-private disconnect on valuation.  Renaissance reports that venture capital-backed tech companies chose to avoid public-market valuations and decided to remain private.  Mergers and acquisitions provided quick exits for tech companies that had filed for IPOs.  The healthcare sector remained dominant, accounting for 40% of all U.S. IPOs.  Another year of elevated biotech activity contributed significantly to this year’s 42 healthcare IPOs, which raised $3.4 billion in proceeds.  The financial services sector raised the most proceeds in 2016.  The 15 financial services IPOs raised $4.3 billion in proceeds.

Private equity-backed IPOs.  The number of, and the proceeds raised in, private equity-backed IPOs in 2016 are the lowest since 2009.  However, PE-backed IPOs continue to perform better than the overall IPO market.  The 30 PE-backed IPOs raised $8.8 billion in proceeds, with only five of the 30 finishing the year below the IPO issuance price.

Venture capital-backed IPOs.  Venture capital-backed IPOs in 2016 also represent the lowest level of activity and proceeds since 2009.  42 VC-backed IPOs raised $3.5 billion in proceeds. 50% of these deals were biotech and only 10 deals raised over $100 million.  The tech sector (historically comprised of VC-backed companies) contributed to the 56% decrease in VC-backed IPOs.  As discussed above, the notable public-private valuation disconnect contributed to the lower IPO numbers.

As 2016 comes to a close, we will continue to monitor the U.S. IPO market and provide updates on this blog.

On May 24, 2016, the Biotechnology Innovation Organization (BIO) published a study, “Emerging Therapeutic Company Investment and Deal Trends,” which collects ten years of data to identify trends affecting “emerging therapeutic companies” (“ETCs”).  ETCs are companies that are (1) developing therapeutics with a lead drug in research and development (“R&D”), or (2) have a drug on the market, but have less than $1 billion in sales at the time of the transaction.

The study focuses on venture capital, initial public offerings (“IPOs”), follow-on public offerings, licensing, and acquisitions.

Venture Capital Trends

Venture funding reached a record high of $6.8 billion during 2015, which included the largest biotech venture capital deal on record, raising $446 million.  The study also found that Series A financing nearly doubled from 2014 to 2015.  The study found that nearly 70% of venture capital funding in 2015 went to early-stage companies and nearly $2 billion was invested in oncology companies.  Although oncology companies were successful in obtaining venture capital funding, the study found that funding was inconsistent across disease areas, as companies in certain disease areas have not rebounded well since the financial crisis.

IPO Trends

The study found that IPOs for ETCs were strong during 2015, with 39 companies going public.  The study found that a positive effect of the JOBS Act has been the increase in the average amount raised per IPO for R&D stage companies from $68 million in 2012 to $90 million in 2015.  Another trend that the study identified was that the clinical development stage that ETCs are in at the time of their IPOs has shifted in recent years.  In the years approaching the financial crisis, there were no Preclinical or Phase I company IPOs in the United States, yet during 2012 to 2015, there were 34 such IPOs.  According to the study, this shift in IPO activity may represent an increased preference for investing in early-stage companies.  When considering the disease type for companies that have obtained IPO financing, the study noted that neurology companies raised $1.05 billion, the highest amount of capital across disease type.

Other Trends

The study also found that: (1) during 2014 to 2015, follow-on public offerings by ETCs increased from $8.9 billion to $16.1 billion; and (2) licensing proved to be a critical aspect of capital raising (reaching a record high of $7.1 billion) and an alternative investment strategy to acquisitions, as 38% of all ETCs partnered during 2015.

A copy of the study is available at: https://www.bio.org/sites/default/files/BIO_Emerging_Therapeutic_Company_Report_2006_2015_Final.pdf

Successful privately held companies considering their liquidity opportunities or eyeing an IPO often turn to late stage private placements. Late stage private placements with institutional investors, cross-over investors and strategic investors raise a number of considerations that are distinct from those arising in earlier stage and venture transactions. Also, for some companies, the late stage private is a prelude to a strategic transaction or an IPO.

Topics:

  • Timing and process;
  • How are the terms of late stage private placements different;
  • Diligence, projections and information sharing;
  • Providing liquidity to early investors and founders through a secondary component;
  • IPO and acquisition ratchets;
  • Governance issues;
  • Valuation issues;
  • The placement agent’s role; and
  • Planning for a sale or an IPO in your negotiations.

Speakers:

  • Anand Subramanian, Qatalyst Partners
  • Barb Izzo, former Managing Director at a Fortune 100 public company, advisor to several successful Silicon Valley tech companies.
  • Jeff Thomas, NASDAQ Private Market
  • Anna Pinedo, Morrison & Foerster LLP
  • Susan Mac Cormac, Morrison & Foerster LLP

SAN FRANCISCO SESSION:

TuesdayApril 26, 2016
Registration/Breakfast: 8:00 AM – 8:30 AM
Session: 8:30 AM – 11:00 AM

Morrison & Foerster LLP
425 Market Street
San Francisco, CA 94105

To register for the San Francisco session on April 26, simply email tstarer@mofo.com.

CLE credit is pending for California and New York.

PALO ALTO SESSION:

Wednesday, April 27, 2016
Registration/Lunch: 11:30 a.m.
Session: 12:00 p.m. – 2:30 p.m.

Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, CA 94304

To register for the Palo Alto session on April 27, simply email tstarer@mofo.com.

CLE credit is pending for California and New York.