valuable lesson, from one of our old portfolio managers......
Message 17267843
So, when Xcyte has its IPO, you can be sure I
wont be helping to ensure the VCs get a return on
their investment. Fool me twice! <g>.
I've talked about this before..... with the dotbomb bubble, the equity structure of biotech IPOs changed between 1998 and 2000. Companies split their shares before IPO. Yes, more shares were made available at ballpark similar prices (except near the top of the biotech bubble, where prices were higher than historical norm), but the fraction of shares that was locked up was larger. VCs wanted and needed a strong market to escape. In some cases, they've "escaped" despite lower prices.
So what's happening? All those private companies with the huge post-money valuations? I've discussed this a bit in the BVF thread...... those private companies are hitting down rounds that are becoming extreme. Most VCs who are leveraged and exposed have recently lost 50% of their net worth, they just don't realize it yet.
This is a good thing...... everybody and his/her brother had become a biotech VC, and equity structures at IPO need to trend back to the historical norm. Most of the "analysts" that were around as the banks were bringing the diluted paper forward are now running hedge funds, and many are shorting the sector.
In the BVF thread and as the diluted paper was floating, we pointed at the game, the "sell to dumbies, one good year and we can retire" game. |
