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Alternative Paths To The Public Markets: Nexeon MedSystems' Form 10 IPO And Capital Consciousness

Alternative Paths To The Public Markets: Nexeon MedSystems' Form 10 IPO And Capital Consciousness

Benzinga recently had the chance to chat with Will Rosellini, a 37-year-old retired pro baseball player with six graduate degrees who now serves as the CEO of Nexeon MedSystems, a company that has developed a neurostimulation system for the treatment of neurological diseases.

In previous articles, the entrepreneur talked about his story, the future of neurotech, the incursions of Facebook Inc (NASDAQ: FB)’s Mark Zukerberg and Tesla Inc (NASDAQ: TSLA)’s Elon Musk into the field, Nexeon’s deal with GlaxoSmithKline plc (ADR) (NYSE: GSK), the company’s products and other brain stimulation technologies in the market.

Toward the end of our discussion, Rosellini explained how Nexeon was going to enter the public markets through an alternative mechanism that does not involve the same steps as most IPOs in the U.S. This article will be the first in a series where Benzinga will look into non-conventional paths to the public equity markets.

IPOs 101

An IPO, or initial public offering, is an event in which a privately held company offers stock to the public for the first time. With the help of underwriters, these companies decide which type of — and how much — stock it will issue and when it will start being sold.

Most commonly, IPOs are finalized through the filing of a Form S-1 with the SEC. These documents typically contain the most important information related to the company going public, like its business model or the way the proceeds from the offering will be used.

Going Public In A Different Way

Unlike most companies trading on the NYSE and Nasdaq exchanges, Nexeon is pursuing a different way to going public, even though SEC records show an S-1 was also filed.

“We filed a Form 10, which is typically reviewed by the SEC,” Rosellini said. What this means is that Nexeon is “essentially volunteering to have the reporting obligations of a public company.”

After that, the company will apply for a ticker symbol with the Financial Industry Regulatory Authority, or FINRA, which will make it able to start trading.

“The thinking behind that was: the biotech offerings have been horrible for the first day of trading [among] retail investors. So, the first thing that the company does as a public company is screw the new investors,” Rosellini said.

Numerous success stories exist of biotech companies that filed Form 10s, allowing the market to price the offering for roughly six months, and only then filed an S-1 to raise the initial capital. Based on these experiences, Nexeon’s management team decided that it would not go out and raise $100 million “just because they could.”

Following the steps of companies like Intel Corporation (NASDAQ: INTC), which raised only $5 million when it went public, Nexeon will try to be “really capital-conscious and prove out the business at each stage,” the CEO said. “That way, we will be able to look at our investors and tell them we thought about them, as opposed to raising a ton of VC [venture capital] money at crazy valuations, not wanting to go public, continuing to try to drive and grow and get market share, but never getting to profitability.”

“Basically, we’re doing it ‘the hard way’ in terms of capital, but we think that discipline will be rewarded over the long haul by investors that saw that we took care of them,” Rosellini said. “We’ve been opportunistic, we’ve made acquisitions [and] we've run other businesses within our business to help cashflow. So, I’d say we’ve done it somewhat by design, to be capital conscious and build a business that people want to invest in.”

Check back for Part 2 of this article, where we’ll look into a crowdsourced (Reg A+) IPO that's coming to the Nasdaq soon.

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