On a global basis, money is pouring into private & public MicroCaps through IPOs, APOs, PIPE, Reverse Mergers, ATMs, RDs, and debt transactions at historical levels. Smart money is getting in early and departing early as usual, but deal size is increasing along with valuations. The recurring theme here is the hunt for quality companies over deal flow quantity.
The Street dependence on institutional investors has resulted in the requirement of greater selectivity of the available issuers yielding more competition between Investment Bankers in winning over investment banking clients. The benefit to issuers is outstanding and has created a sellers market as the IBs compete for their business. The greatest benefit to issuers from this competition is pre-funding valuations and deal size increases.
As an example, two investment banks competing for the same transaction; have both tangible and intangible ways of competing. If one offers $20M for 30% of the company and 8% commission and another offers $30M for 32% and 8% commission with intangibles almost equal, guess which investment bank gets the deal...
That's what's going on. The better the issuer financials, management team, sexiness and projections, the greater the the competition to land the deal. This process is predominant in the pre-IPO Nasdaq eligible issuers and listed issuer refinancings. Lower quality issuers are seeing similar interest, but deal sizes are smaller with less competition for deals because smaller issuers are in much greater supply.
The retail investors will be lucky to get in on the good ones early and are usually buying early institutional seller's stock in the aftermarket if the deal is deemed hot. Nothing new here.
The rest of the news is Reg A + jumping onto everyone's radar screen, and the emergence of private equity funding platforms one after another and ETF's dominating trading volumes and the increasing M&A activity throughout the MicroCap market.
In summary the MicroCap stock market heading into the 2015 halfway point is healthy, growing and operating on all cylinders. The areas of concern are the lack of aftermarket stock trading support, liquidity, and over valuation of new issues.
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