Fenwick IPO Report Reveals Divergence in Life Sciences Tech IPO Structures

Fenwick & West securities partner Dan Winnike spoke with Silicon Valley Business Journal about a Fenwick report he co-authored on the state of the U.S. technology and life sciences IPO market in 2014.

The study found that while tech and life sciences offerings jumped 36 percent in 2014, there was a sharp fall-off in the second half of the year in tech offerings. The study also noted that most life science IPOs were dominated by insider buying.

While 13 U.S.-based technology companies completed IPOs in the second half of 2014, this number was down nearly 50 percent from the 25 completed in the first half of the year, and was the lowest number of tech deals for any six-month period since the end of 2012.

Noting that very few tech IPOs during that timeframe included insider buying, Winnike told the Journal, "What this says to me is that largely life science companies have very high cash burn in their initial stages when they are in the regulatory process.”

Winnike continued, "A lot of them are going public before they become cash-flow positive when the market is receptive like it was last year."

New tech companies, on the other hand, have additional motives for going public besides raising money, Winnike said.

"Those tech companies aren't going public just to raise capital. They are trying to create a secondary market for their stock and provide liquidity for their stockholders and employees. They are also seeking a publicly traded currency to use for other purposes," he said.

The survey found that four out of five life sciences IPOs completed in the second half of the year included insider participation, compared to just three techn IPOs, demonstrating the increasing divergence in how and when tech and life sciences companies access public markets.

The full article is available through Silicon Valley Business Journal's website.

Check out Fenwick's survey for more insight into the IPO market in 2014​.