The record number of Biotech companies that have gone public in recent times is not only impressive in terms of the amount of money these companies have made but also the vast number of firms that have managed to achieve public status. However, while getting public status is a hard road to navigate, staying public can be an even bigger challenge!
Going Public Has Never Been Easier
It is important to note that while going public is a great achievement, it has become easier in more recent times in the US. This is mainly due to the amount of money that is up for grabs and because firms are changing the way they work towards going public. Some of the main changes include:
- Going Public Earlier – around ten years ago, a company would, on average, achieve IPO status in ten years. The current timeframe is just four!
- Having More Money – interestingly, new IPOs tend to have more than double to spend than their counterparts ten years ago, but they are also spending it at a faster and higher rate.
- Improved Valuation – IPO valuations have also gone up more than three times from ten years ago, with the average being around $500 million!
- Special Purpose Acquisition Corporations (SPACs) – these companies have boomed during the pandemic with a 320% increase between 2019 and 2020. This alternative way to become public is more streamlined and has been the driving force behind large numbers of biotechs going public.
While it may be easier and more financially beneficial to go public earlier, this change in dynamic has also reduced the covetable nature of the process, reducing it to just another step along the way.
Working Hard to Stay Public
It would be unfair to say that getting public status is simple without sharing the fact that remaining in that position is incredibly hard. For example, public exchanges have listing requirements that can make continued compliance challenging.
When you stop to consider that so many biotech companies have gone public, getting notoriety has become harder than ever before. The first two to three years of being a public company involve getting noticed by analysts, so investors pick up stock rather than becoming the company that suffers eternal obscurity. In reality, with so many different offers available, achieving a core position with institutional investors can be challenging.
Top Tips for Continued Success
There are lots of theories about how firms can work to stay successful; the following tips are sure to help you plan in advance and get the results you are looking for:
- Don’t Be Complacent – no matter how quickly a biotech goes public; you should consider the financial and operational frameworks necessary to enable continued success.
- Spend Only When Needed – having cash thrown at you can leave you tempted to go wild and start a myriad of new projects. However, taking a more frugal approach will help your company cope during tough times. Analyze each expense and only invest in what will improve your outcomes.
- Expect Hard Times – no matter how great your offer is, every firm will experience tough times. Planning for these times will not only help you manage them effectively but will also ensure that they don’t derail your company’s goals.
The changing nature of a biotech company’s relationship with public markets is something for any conscientious executive to be aware of. A lack of understanding could mean making the wrong decision about when to go public and maintaining public status can be more difficult than achieving it.