In the event you missed it, Gilmartin held its Inaugural Emerging Growth Company Showcase featuring a Keynote Panel on MedTech Financing in The Current Market that was joined by Morgan Stanley’s Peter Harrison (Managing Director, Investment Banking), Piper Sandler’s Neil Riley (Managing Director, Equity Capital Markets), and Wilson Sonsini Goodrich & Rosati’s Philip Oettinger. The panel was moderated by Lynn Lewis (Founder & Chief Executive Officer of Gilmartin Group).
In this post, we are sharing some of the Key Takeaways on the IPO Market from our Keynote Panel:
There is an expectation that the IPO market will begin to pick up in 2023
While expectations have been pushed further out than originally anticipated, panelists believe that there would be a pickup in the IPO market beginning mid-2023 (2Q23 at the earliest).
The IPO market may generally favor quality versus growth when the IPO market reopens
Companies with scale, strong balance sheets, and prudent management would be choice candidates.
Investors are looking for more prudent management during the IPO process
Market sentiment has shifted towards a more balanced approach to topline growth and profitability. Management teams need to evaluate the amount of capital being raised and whether it is sufficient to reach the point of profitability. In the current environment, investors need assurance that management teams are mitigating the amount of dilution.
Most companies begin to work on their corporate governance structure and IPO readiness checklist about a year out before going public
If your company is a choice candidate (i.e., at scale with a strong balance sheet) for when the IPO market reopens in mid-2023, you should begin to think about what needs to be accomplished or at least start the process of drafting the S-1. For a more comprehensive look at considerations in the 12 months before going public, check out our post here.
Completing a crossover round prior to an IPO has been the general advice over the past few years
There is an advantage to having a strong investor base for the crossover round because they will help build the investor group going into the IPO process. However, it is not a prerequisite for MedTech companies, and this mainly applies to Biotech. The best scenario for completing a crossover is when investors are approaching your company, which may be easier now as there is a significant amount of dry powder on the sidelines.
It is difficult to perfect the timing of an IPO to optimize price.
In practice, if a company is looking to go public, it should be at a time when a company can leverage the capital infusion to drive growth (i.e., when the company has a built-out salesforce and/or pipeline).
Given the current market environment, it’s hard to perfect the timing of an IPO to optimize price. The panelists expressed confidence that the market will be open next year and advise companies to look at it for the long game. Leverage your capital infusion at a point in time when the fundamentals can accelerate growth, or in other words, when you are ready from a sales team, pipeline, etc. perspective. Though it’s easier said than done, setting reasonable expectations and being thoughtful about your cadence with strategies and investors will be paramount in the end.
The last piece of advice and insight from our panel on MedTech Financing in the Current Market is this: companies are bought, not sold. Dialing for dollars is successful, at most, 50% of the time. Where companies find success is in fostering relationships with strategy and putting effort into investor relationships. Preparation and strategic planning will be key heading into 2023. The Gilmartin Group can ease the pre-IPO process and set you on the right track as you embark on becoming a public company. To learn more about Gilmartin and how we strategically partner with our clients, contact our team today.