IPOs: How they work and what they mean for your portfolio
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Transcript of IPOs: How they work and what they mean for your portfolio
IPOs: How they work and what they mean for your portfolio An OurCrowd Investor Education Webinar
Some background
Elan Zivotofsky General Partner
Head of Investment Team
! 17 years experience investing in Israeli companies
! MD Prelude Israel Fund ! SVP, Head of Tech Banking at
Lehman Brothers ! Israeli technology analyst at
Goldman Sachs ! Morgan Stanley technology
analyst
How IPOs work Public vs Private Effects on early investors Process
Going Public ! Portion of your company
traded on public exchange ! IPO: first time shares are
offered publicly ! Positives:
» Liquidity » Credibility
Public vs Private
“We’re going public for our employees and our investors… we’d work hard to make [their equity] worth a lot and make it liquid, and this IPO is fulfilling our commitment.” – Mark Zuckerberg
“Look at Benioff and Bezos, they stole the microphone and controlled the industry. Neither said ‘I don’t want to be public, someone might look at my numbers’” – Doug Leone, Sequoia
Going Public ! More positives:
» Big capital base (avg US startup raised $160M prior to IPO, then $470M at IPO)
» Involve new class of investors » New acquisition possibilities
! Drawbacks: » Scrutiny of leadership » Disclosures to SEC » Earnings statements & a new
approach to investor relations
Public vs Private
“[public] companies understand they’re owned by shareholders… CEOs must listen” – Peter Weinberg
“Companies should be rock solid, both financially and technically, before going public” – Marc Andreessen
Private vs Public
~$35B revenue
Acquired by founder for $25B
Acquired by BRK.A for $23B
~$140B revenue
Staying (or going) Private ! Completely owned by
founders and/or investors ! Fewer disclosure
requirements ! Private doesn’t necessarily
mean small ! Reasons for staying private:
» Control (Michael Dell example) » Reduced scrutiny and
disclosure requirements » IPOs are very expensive
What does IPO mean for earlier investors?
Liquidity
Valuation boost
Potential dilution
Investment
Equal information
Many private investors exit
Board/investor hand-off
Management
The IPO Process: An Overview
The IPO Process: An Overview
Corporate decision is made
A privately owned company decides to seek outside
investors in order to raise money
Regulatory notification
The company submits a detailed disclosure document
explaining its business, financial results, strategies and
risk factors to the SEC
The IPO Process: An Overview
I-Bankers & Roadshows
An investment bank steps in at this point, evaluating the company and offering to
underwrite shares. They then run a roadshow to generate
investor interest
A price is set
Before the IPO, the investment bank sets a price based on
investor interest.
The IPO Process: An Overview
Opening price is set Public trading begins
The ReWalk Example Timeline of a successful venture investment ReWalk’s decision to go public ReWalk’s IPO in context
ReWalk’s Story: Start to End
February 2013: Internal Round Opened ReWalk opens a round of financing available only to existing investors.
May 2013: OurCrowd wins access After pursuing the deal, OurCrowd is the only new investor to join the VCs in this closed round.
OurCrowd members get the opportunity to invest on the same terms as OurCrowd and the VCs leading the round.
June 2013: OurCrowd members invest - 57 individual OurCrowd members participate - 9 different countries represented - $23,150 average investment - $1.3M total raised
September 2013: Yaskawa invests Japanese robotics giant Yaskawa makes a $10M strategic investment in ReWalk at a 20% premium to the valuation at which OurCrowd investors came in.
The investment effectively increases Argo’s market value from $23M pre money to $52M.
June 2014: FDA Approval; Follow-on Round ReWalk is granted FDA clearance for its at-home-use product, making it the first and only exoskeleton to be cleared for sale in this important market.
OurCrowd participates in a Series E round, with members investing $2.59M in ReWalk.
July 2014: ReWalk files for IPO ReWalk files for an initial public offering on NASDAQ. Investment banks Jefferies and Barclays to be book runners.
September 2014: RWLK lists ReWalk lists publicly on NASDAQ under the ticker RWLK. Offering 3.45M shares at a price of $12, the company raised a total of $41M.
The
futu
re March 2015: Liquidity for early investors
ReWalk’s 180 day lockup period is scheduled to end in March 2015, at which point original investors are able to sell their stakes in the company in the public markets.
ReWalk’s Story: What it means for OurCrowd members
! OurCrowd total investment into ReWalk: $3.39M » D Shares: 11988 shares » E Shares (including warrants): ~15250 shares
! Convert to ordinary shares – 18 to 1 split at IPO
! Resulting OurCrowd ownership of ReWalk (RWLK) » After IPO – 617,664 shares (5.4% ownership)
Next steps for OurCrowd & VCs
! We’ll distribute shares after the lockup, deducting carried interest in the form of shares
! Now we’ll know nothing more than any other investors, including yourselves
! All VCs step back at this point, except those holding a board seat
! What to expect: News will impact price of stock in real time. Direct correlation of business performance to stock price
! What to expect: Regular company reporting directly to the public
ReWalk’s decision to go public
! Which exchange? ! Why now? ! What’s next?
ReWalk in context
M&A vs IPO in Israel ! Israeli companies are well
known for being acquired early and frequently
! Hundreds of multinationals are established in Israel and are building R&D centers around acquisitions
! IPOs normally single digit contributions to Israel’s 70, 80, 90, or 100 annual exits
ReWalk in context Some of the acquirers from ‘05-’10
New breed of Israeli companies forming ! M&A size is increasing ! Israeli serial entrepreneurs able
to attract later stage financing from big international sources more easily
“Recently, we are seeing Israeli companies grow, and become world leaders in their areas. We are seeing companies with revenues of over $100 million. We did not see these in the past. They were being sold much earlier, often pre-revenue.” Rubi Suliman PwC High-Tech Partner
ReWalk in context
32# 35#
51#
81#
111#
83#
0#
20#
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2008# 2009# 2010# 2011# 2012# 2013#
Mill
ions
of $
Rising average M&A prices ($M)
Listings on NYSE + NASDAQ
ReWalk in context
USA:%7600%
Israel:%134%
China:%192%
Canada%220%
Germany,#10#
Switzerland,#14#
UK,#11#
India,#14#
France,#8#
New breed of Israeli companies forming ! IPOs are increasing
» Borderfree » Outbrain » Matomy » Mobileye
“2013’s four Israeli NASDAQ IPOs have had on average an 85 percent increase since offering. So the Israeli companies do well on NASDAQ” - Meyer Frucher, Chair of NASDAQ
IPOs: How they work and what they mean for your portfolio An OurCrowd Investor Education Webinar