Corporate strategies for nanotech companies and investors in new economic times

Nanotechnology Law and Business

Volumn 6, Issue 2, 2009, Pages 251-276

  Graffagnini, Mark J ^a  

^a Nanotechnology Law and Business   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

CAPITAL EXCHANGE; CAPITAL MARKETS; CORPORATE STRATEGIES; ECONOMIC CLIMATES; ECONOMIC DOWNTURN; FOREIGN CAPITAL; INITIAL PUBLIC OFFERINGS; MARKET FACTORS; OPEN MARKET; STRATEGIC INVESTMENTS; SURVIVAL AND GROWTH;

COMMERCE; ECONOMICS; INVESTMENTS;

MERGERS AND ACQUISITIONS;

EID: 68649094771     PISSN: 15462080     EISSN: 15462080     Source Type: Journal    
DOI: None     Document Type: Article

References (85)

1. See, e.g., Erick Schonfeld, The VC Liquidity Drought in Charts, TECHCRUNCH, Jan. 7, 2009, http: //www.techcrunch.com/2009/01/07/the-2008-vc- liquidity-drought-in-charts/ (last visited Jan. Feb. 22, 2009)
2. Press Release, Nat'l Venture Capital Ass'n, Venture Capitalists Predict a Difficult 2009, Dec. 12, 2008, available at http://www.nvca.org/pdf/ 09PredixRelease.pdf (last visited Jan. 22, 2009);
3. Mark Calvey, Venturebacked IPOs Last Year Hit 30Year Low, S.F. BUS. TIMES, Jan. 5, 2009, http: //www.bizjournals.com/sanfrancisco/stories/2009/01/ 05/daily6.html (last visited Jan. 22, 2009);
4. Erick Schonfeld, The 2008 VC Liquidity Drought in Charts, TECHCRUNCH.COM, Jan. 7, 2009, http: //www.techcrunch.com/2009/01/07/the-2008-vc-liquidity- drought-in-charts/ (last visited Jan. 22, 2009)
5. Kim Hart, Venture-Backed IPO Tally: Zero, Wash. Post, July 1, 2008, at D01, available at http: //www.washingtonpost.com/wp-dyn/content/article/2008/06/ 30/AR2008063002292.html (last visited Jan. 22, 2009)
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7. See note 1, supra.
8. Anthony Ha, Venturesource: Worst Venture Liquidity in Five Years, VentureBeat.com, Jan. 2, 2009, http: //venturebeat.com/2009/01/02/venturesource- lowest-venture-liquidity-in-five-years/ (last visited Feb. 20, 2009);
9. See Appendices A& B for the companies listed on the Lux Research Nanotech Index and the Merrill Lynch Index.
10. e.g., Barnaby Feder, Going Public without Profits or A Product? Yes, in 2004, N.Y. Times, May 24, 2004, avaialble at http://query.nytimes.com/gst/ fullpage.html?res=9A07E2D7163EF937A15756C0A9629C8B63&fta=y (last visited May 7, 2008) ("Josh Wolfe, a partner in Lux Capital, an early investor in Nanosys, told nanotechnology executives and investors at a trade show in New York last week that he expected at least four other nanotechnology companies to go public this year. He also said they might soon see ''a Netscape-like I.P.O., '' referring to the popular initial public offering in 1995 that ignited interest in Internet stocks.").
11. R. Douglas Moffat & Ruben Serrato, Emerging Nanotechnology Firms and Access to Capital Markets, 1 Nanotech. L. & Bus. 305 (2004) (analyzing the withdrawal of the Nanosys, Inc. IPO); Stephen Waite, Dealing with Financial Turbulence: The Case of NanoDynamics, 4 Nanotech. L. & Bus. 485 (2007) (examining the withdrawal of the NanoDynamics, Inc. IPO)
12. Investing in Nanotechnology Stocks-Golden Opportunity or Bad Idea, NanoWerk.com (Jan. 25, 2007), http: //www.nanowerk.com/spotlight/spotid=1328.php (last visited May 7, 2008).
13. Id.
14. Thomas L. James, Use of Reverse Mergers to Bypass IPOs: A New Trend for Nanotech Companies, 4 Nanotech. L. & Bus. 95, 96-97 (2007).
15. See, e.g., Denis Rice, The Nanotech IPO, 1 Nanotech. L. & Bus. 315 (2004).
16. J. Steven Rutt & Stephen B. Maebius, From Plastics to Nanotechnology: Cambridge Display Technology's IPO Registration, 1 Nanotech. L. & Bus. 407 (2004)
17. Dumas Garrett, Break-Out in Nanotech-The Next Potential Wave of IPOs, 2 Nanotech. L. & Bus. 274 (2005) (Pubitemid 43083286)
18. See note 1, supra.
19. for many companies, cuts and other cost-reduction measures began to appear prudent in late 2007, and such measures became viewed as necessary in late summer/fall of 2008.
20. Fenwick & West LLP, Trends in Terms of Venture Financings in Silicon Valley, 2009, http: //www.fenwick.com/docstore/VCSurvey/Q109-VC-Terms-Survey- Report.pdf (last visited June 2, 2009).
21. Anthony Ha, Good Luck with that Funding: Q1 Sees Lowest VC Investment in More than A Decade, VentureBeat, Apr. 17, 2007, http://venturebeat.com/2009/04/ 17/good-luck-with-that-funding-q1-sees- lowest-vc-investment-in-more-than-a- decade/ (last visited June 2, 2009).
22. Matt Marshall, Venture Capital Shrivels 40 Percent-It Really is the End of the Tech Boom, VentureBeat, Apr. 13, 2009, http://venturebeat.com/2009/04/13/ venture-capital-shrivels-40-percent-it-really-is-the-end-of- the-tech-boom/ (last visited June 2, 2009).
23. Note that companies may generally avoid a lower valuation by undertaking a debt financing (e.g., convertible promissory note and warrant financing), but this may present later difficulties for the company ormay require the consent of prior lenders (such as banks who have extended lines of credit) and should be carefully evaluated with counsel for the company. See e.g., Caine Moss, VCs Are Turning the Screws with Financing Terms, VentureBeat.com (Apr. 18, 2009) (discussing "alternative financing structures").
24. Robert P. Bartlett, III, Understanding Price-Based Antidilution Protection: Five Principles to Apply when Negotiating a Down-Round Financing, 59 The Bus. Lawyer 23 (2003).
25. Id. at 40.
26. Mike Moradi, When David Met Goliath-The Art of Corporate Partnering for Nanotechnology Start-Ups, 2 Nanotechnology Law & Business 85 (2005). (Pubitemid 43079352)
27. Allison Spinner, Strategic Investors in the Early Stage Company, in The Entrepreneur's Report: Private Company Financing Trends 4, 10 (Winter 2007), http://www.wsgr.com/PDFSearch/vftrends-q407.pdf (last visited June 9, 2008) (providing a detailed and useful analysis of issues presented in this part).
28. Id.
29. Id.
30. Id.
31. Id.
32. Mark J. Graffagnini, Raising Venture Capital Into a Nanotherapeutic Devices Company, 5 Nanotechnology Law & Business 208 (2008) (discussing several large acquisitions and merger deals); see also Press Release, Shrink Nanotechnologies, Shrink Nanotechnologies Acquires Acclaimed Nanotechnology Business for $9, 000, 000, June 3, 2009, http: //www.businesswire.com/ portal/site/google/?ndmViewId.=news-view&newsId.=20090603006036&ne wsLang=en (last visited June 4, 2009) (discussing the stock-for-stock acquisition); see also Press Release, EcoloCap Solutions, Inc., ECOS: To Acquire Micro Bubble Technology, Inc., May 28, 2009, available at http: //www.smalltimes.com/News/Display-News-Story.cfm?Section=WireNews& SubSection=HOME&NewsI D=178563 (last visited June 4, 2009).
33. Fenwick & West LLP, Mergers & Acquisitions for High Technology Companies, 2002, http: //www.fenwick.com/docstore/Publications/Corporate/MA.pdf (last visited June 2, 2009).
34. Id.
35. Id.
36. See Marshall, supra note 16.
37. Justin Moresco, Steve Westly Predicts the Next Cleantech IPOs: Tesla, Silver Spring, Solyndra, Reuters.com, May 25, 2009, http://www.reuters.com/ article/earth2Tech/idUS329112097920090525 (last visited May 25, 2009) ("[I] it's harder for startups to go public now than it was two years ago, but any company that does more than $100 million in revenue with 1, 000 percent growth is going to attract interest in the market, regardless of a downturn.").
38. Tim Mullaney, Venture Firms Back "Hybrid" IPOs to Help Startups Sell Shares, Bloomberg.com, June 1, 2009, http: //www.bloomberg.com/apps/news? pid=20670001&sid=aDzgmHwtX9dq (last visited June 4, 2009).
39. London Stock Exchange, AIM: Growth Market of the World 15 (2008), www.londonstockexchange.com/NR/rdonlyres/3B5EDCF9-1E01-4B7C-A31A- 95B7170675B9/0/LSEAIMBROCHURE-WEB.pdf (last visited May 7, 2008). As of April 2008, there were 1, 683 companies trading on AIM, 481 of those companies were international, i.e., non-United Kingdom companies.
40. London Stock Exchange, AIM-The Route to Global Growth, Presentation by Richard Webster Smith, Business Development Manager (Apr. 11, 2008). This number has declined recently. See note 44, infra.
41. London Stock Exchange, supra note 33, at19-20.
42. Id.
43. 37 London Stock Exchange, supra note 33, at 16.
44. Abulani Lefall, L.A. Firms Lured by Foreign Exchanges; Launching IPOs is Easier, but U.S. Markets Still Goal, L.A. Bus. Journal, Apr. 23, 2007. Of the 120 U.S. issuers listed on the AIM, California companies make up 20. Other examples of U.S. companies listed on the AIM include California Nanotechnologies Corp. and Omni-Late Industries Canada, Inc.
45. London Stock Exchange, supra note 33, at 22.
46. Id. at 25.
47. Id.
48. Ian Cliffe, Don't Write Off AIM, Real Business, Jan. 9, 2009, http: //www.realbusiness.co.uk/printable/5516246/don't-writeoff-aim.html (last visited Apr. 15, 2009).
49. Id. See also Alistair Dauber, Small Talk: End is Nigh for AIM's 'Nasty Little Business, ' The Independent, Jan. 19, 2009, http://www.independent.co.uk/ business/sharewatch/small-talk-end-is-nigh-for-aims- nastylittlebusiness-1419359 (last visited Apr. 14, 2009).
50. Id.
51. Adam Smith, London's Small-Stock-Market Blues, Time.com, May 12, 2009, http://www.time.com/time/business/article/0, 8599, 1897595, 00.html (last visited May 25, 2009).
52. Ben Deighton, UK's AIM Sees Best Fundraising Month Since June 08, Reuters.com, May 29, 2009, http: //www.reuters.com/article/ rbssFinancialServicesAndRealEstateNews/idUSLT9564220090529 (last visited June 2, 2009).
53. Leading Nanotechnology Company Begins Trading on the London Stock Exchange, AzoNano.com, May 7, 2009, http: //www.azonano.com/news.asp?NewsID= 11360 (last visited June 4, 2009).
54. London Stock Exchange, supra note 33, at 29.
55. The irony of the collapse of several of the world's most "well-respected" financial advisory firms and investment banks is not lost on the author.
56. See note 42, supra.
57. London Stock Exchange, supra note 33, at 30.
58. Id. at 31.
59. Id.
60. Smith, supra note 45.
61. London Stock Exchange, supranote 33, at 49.
62. Id.
63. Id. at 37.
64. Id.
65. Id.
66. Id.
67. Tim Stocks, Head of Int'l Equity Capital Markets, Taylor Wessing, LLP, Why London Capital Markets? The Alternative Investment Market-A Robust Model, Presentation at Wilson Sonsini Goodrich & Rosati, P.C., Apr. 2008.
68. Nigel H. Reynolds, London's Alternative Investment Market and U.S. Companies, Kaufman eVenturing (2006), http: //venturing.kauffman, org/Resources/Resource.aspx?id=33414 (last visited June 11, 2008).
69. See, e.g., Phil Wahba, IPO VIEW: Upcoming Deals to Test Appetite for Tech Companies, Cnn Money, May 8, 2009, http: //money.cnn.com/news/newsfeeds/ articles/reuters/MTFH85320-2009-05-08-17-27- 16-N08421787.htm (last visited May 25, 2009).
70. Toronto Stock Exchange & TSX Venture Exchange, TSX Group-The Place to Grow, May 2007, http: //www.tsx.com/fr/pdf/Technology-Sector-Sheet.pdf (last visited May 29, 2009). Note that the Toronto Stock Exchange and TSX Venture Exchange are now owned by the TMX Group, Inc. following a merger with the Montreal Exchange. This change is reflected in many of the sources cited, but much of the information and sources cited came from the Toronto Stock Exchange prior to the take-over by TMX Group, Inc.
71. Press Release, TMX Group, Inc., TMX Nanotechnology & Renewable Power Forums Introduce U.S. Cleantech Companies to Public Venture Capital, May 13, 2009, available at http: //news.prnewswire.com/DisplayReleaseContent.aspx?ACCT= 104&STORY=/www/story/05-13-2009/0005025158&EDATE= (last visited May 29, 2009); see also TMX Group, Inc., TMX Group-A Dynamic Cleantech Marketplace, http: //www.tsx.com/en/pdf/Cleantech-Sector-Sheet.pdf (last visited May 29, 2009).
72. Id.
73. Toronto Stock Exchange, Lines of Business, http://www.tsx.com/en/about- tsx/corporateinformation/lines-of-business (last visited June 13, 2008).
74. Lisa Sibley, IPO Drought? Cleantech Companies Flood Canadian Markets, Cleantech Group, June 2, 2009, http: //cleantech.com/news/4530/canada-cleantech- flood (last visited June 2, 2009).
75. See TSX Venture Exchange, Your Guide to Public Venture Capital, 2008, http: //www.tsx.com/en/pdf/GoingPublicOnTSXVenture.pdf (last visited May 29, 2009).
76. Joseph Guinto, It's A Bull Market, American Way Magazine, June 15, 2008, http: //www.americanwaymag.com/tsx-united-states-canada-toronto-coastal-contacts (last visited May 29, 2009).
77. Id.
78. Delilah Panio, Why Are US Companies Going Public in Toronto?, Venture Beat, Nov. 5, 2007, http: //venturebeat.com/2007/11/05/why-are-us-companies- going-public-in-toronto/ (last visited May 29, 2009).
79. Toronto Stock Exchange & TSX Venture Exchange, supra note 64.
80. Mullaney, supra note 32; Lynn Cowan, Going Public: New IPO Style to List Small Caps, Wall St. J., June 2, 2009, http: //online.wsj.com/article/BT-CO- 20090602-716830.html (last visited June 4, 2009).
81. Press Release, InsideVenture, Inc., InsideVenture Opens Direct Private Market for Long-Term Institutional Investors and Pre-IPO Companies, Nov. 18, 2008, available at http: //www.insideventure.com/files/InsideVenture- OpensPremiereMemberships-111808.pdf (last visited June 4, 2009).
82. Press Release, InsideVenture, Inc., InsideVenture Launches New Hybrid Initial Public Offering Today at New York Stock Exchange, June 1, 2009, http://www.insideventure.com/files/InsideVenture-HPPO-June1-2009- FINAL.pdf (last visited June 4, 2009).
83. Id.
84. Id.
85. Id. See Mullaney, supra note 32.