Last week's $75 million private placement in Arthrocare (ARTC.PK) was not a one off event. It was more like a sign of the times. Private placements are investments in a company where the investor is a small group of chosen private investors or even a single private investor. It doesn't even matter if the company is public or private, a private placement has to do more with who is doing the investing.
The times are showing that these investors still have faith in the industry despite the great collaspe of 2008 and its aftermath.
Around this time last year before the markets froze, the industry had raised nearly $500 million in private capital. Our own internal research shows that a remarkable $453 million (see attached table) has been raised by the industry so far this year. This has occured in spite of continued anxiety about economic performance on Main Street and the near panic levels of selling on Wall Street during March and April.
Another notable recent private placement is MAKO Surgical's (NasdaqGM: MAKO) $54 million private placement of common stock. The MAKO and Arthrocare financings are clear cut cases that there is firm demand in the capital markets for differentiated orthopedic technologies.
While the recent activity in private placements reflects the continued attractiveness of certain industry sectors and technologies, there has also been evidence of a number of situations where investors have shied away, particularly with the smaller spine companies.
Even with the interest in new technologies, there is a decreased patience in the investor community for "time to market" and a desire for immediate, if not pre-existing, revenue scale. One trend that has been going on for some time now is venture capitalists, who are traditionally early stage, looking to make private investments in public companies where an IPO is not needed as a path to liquidity.
As much as the dollars coming in are a sign of the times, where the dollars go and from whom they come also says that the times are a changin'.
