In a RPO, a private company merges with a public company that no longer has a business but maintains a listing (a 'shell'), generally on the OTCBB or Pink Sheets. A RPO is a cheaper and faster way to access public markets without a formal IPO and may offer an attractive alternative to private financing. It is often done in conjunction with a 'PIPE' (Private Investment in Public Equity) whereby private investors are given opportunity to invest on terms not available to public.
We believe we are at the early stages of a fundamental change in the perception and volume of RPO transactions.
- IPO market remains very selective
- M&A good for VC investors, not great for most management teams
- Valuation arbitrage available for late stage private-to-RPO
- New stories welcomed by fundamental investors
Factors that create a successful RPO
- Execution of Company's business plan is paramount
- More trading volume in the public company generally equals better stock performance
- After executing the RPO, the Company needs to maintain active and well-managed IR program
- Company has a qualified and properly structured Board of Directors and Management Team
Benefits vs. IPO
- Shorter timetable to public status than IPO -- 10-12 weeks vs. 4-6 months
- Less risk for the company
- Relative ease of execution compared to an IPO
- Raise capital without conventional IPO minimums
- No wait for market/underwriter bandwidth, etc.
- Expansion of investor universe interested in alternative investment transactions
Benefits vs. Private Round
- Public companies valuations are higher than private companies
- Increases ability to recruit employees with stock options
- No concentration of ownership at the Board level
Benefits of our approach
- Optimize shareholder valuation
- Timing of equity raise -- accretive financings as market conditions permit
- Provide near-term liquidity for investors that want it
- Provide growth capital to capitalize on opportunities -- public stock for acquisitions
