Firstly, I want to start this post by sincerely congratulating Peter French and the Benitec (ASX : BLT) team for pricing their IPO. I don’t really like most of what this company does but you have to hand it to them for their tenacity and I genuinely admire the staying power. I think a lot of other people would have thrown in towel and Peter deserves our respect.
Of course, some people may have argued that it would have been better to throw in the towel, take the market feedback that the company isn’t ready for prime-time, and come back later. The NASDAQ listing priced at less than $10 a share (as I said it would) and whilst the punters on HotCopper might be delighted about the lack of dilution, this was extremely expensive money. $13.8m before offering expenses isn’t a whole lot of cash and the fact of the matter is, this entire effort probably cost the company at least USD $2-3m and adds a significant ongoing financial, legal and regulatory ovhead. When we see good (or at least high-potential) companies like AirXpanders or Adherium pick up $30m+ bucks on the ASX at a much lower cost of capital than the (effective) $10-12m that Benitec raised in the US, it really puts the risk profile of BLT into perspective. For all the “Mum and Dad” retail investors out there, this is a big moment of calibration for you, and you should contemplate your investment with an appropriately risk-adjusted lens.
My personal viewpoint is that this IPO was not a success for BLT and it validates my opinion that it is a poor-quality investment proposition. You also have to remember that this cash came at a huge expense and distraction of management time as well. Don’t get me started on the options/warrants. Yuk.
However, I would like to be positive for a minute. Clearly, the real prize in this IPO is to be listed on NASDAQ and this is no small accomplishment. Although I have previously commented on the poor track record of Australian companies surviving a dual-listing process, if BLT really does show some clinical efficacy then having a toehold on NASDAQ is probably BLT’s best shot at raising the serious capital that would enable the later stage clinical development, should it be warranted. But we should also recognise that it is only a toehold and a tenuous one at that. BLT is really going to have to show some magnificent results to stay listed on NASDAQ because its tenure is truly marginal with its current valuation and balance sheet.
I’ve said it before, I and I will say it again. The best shot that BLT has at being taken seriously as a world-class biotechnology company is to start behaving like one. Now that it is NASDAQ-listed, it has no excuses anymore for acting like a bunch of bogons. That means thinking carefully about it’s communication strategy (and start by getting a decent US communications firm that might have a shot at making the “Boyz from Balmain” look a little more sophisticated). It means less continuous disclosure and PR buffoonery (like trading halt requests prior to a fully disclosed offering), and it means building a credible mass of clinical evidence before making statements to the public. We don’t want to hear any more crap about a patient being dosed – we want to hear meaningful clinical outcomes articulated on at least a cohort basis, if not a study basis.
Fundamentally, however, I think it is a sad morning for Australian biotechnology. This is not a success for the industry and it just reminds everyone around the planet how mediocre many (not all, but many) of our companies are. As one analyst colleague of mine (who shall remain nameless) commented this morning, “No wonder US investors start to get wary when guys with corks hanging off their hats turn up trying to sell them the next new blockbuster drug or device.”
Sad but true.
We need to fix this, it’s so unnecessary.