Board Lens

IPOs Surge Fueled by Need for Cures, Private Getaways (August 20, 2020)

Despite the economic setbacks created by the COVID-19 pandemic, the initial public offerings (IPO) market is having a resurgence. Unsurprisingly, given the current health crisis and the urgency around finding treatments and cures for COVID-19, biotech firms are among those to have listed publicly on US exchanges for the first time. They include Legend Biotech Corp., Berkeley Lights, and vaccine company CureVac. "So far this year, US-listed biotech companies have raised roughly $9.4 billion in initial public offerings, already beating the $6.5 billion raised in all of 2018, the biggest year on record," the Wall Street Journal reports. 

Airbnb's IPO arrives despite the pandemic's destruction of the company's market, as droves of consumers canceled vacation plans to avoid potential exposure to the virus. Airbnb in April predicted that its 2020 revenue could fall by over $2 billion—about half of its 2019 revenue—as a result of the public health crisis. Airbnb also laid off nearly 2,000 employees in May and delayed going public, in the making since September 2019. However, the lure of tapping the capital markets returned with a June and July uptick in US bookings on the site as people sought out private getaways within driving distance of their homes and employee pressure to go public as certain incentive stock options are due to expire this fall.

Implications for Boards: The widespread economic distress caused by COVID-19 does not mean a wholesale economic growth suspension. Directors of certain pre-IPO companies may find that this environment is an opportune time to seek funding in the public markets, especially if the company serves current or emergent needs that have been intensified or accelerated by the health crisis. Even companies that don't explicitly fall into those categories may find that current conditions create new market demands that make going public a viable—and reasonable—course of action. 

Key Questions Directors Should Ask:

• What market conditions indicate that this is the right time for the company to make an IPO?
• Is the company's pre-IPO board strategically composed so that the company can transition from a private to a public entity, meet new fiduciary duties, and thrive in a volatile environment?
• As a public company director, what companies are preparing to go public that with additional funding could pose a more substantial threat or provide a windfall? 

Mosey Resources:

"How Directors Shape Successful Start-ups" details the importance of strong boards and key director characteristics at start-up companies, and how they can prepare such companies for IPO success. In addition, "Expert Insights: Business Transformation and Restructurings" will be one of the sessions offered during Mosey's 2020 Global Board Leaders' Summit and explores the board's role in overseeing strategy and risk at different points in the company's life cycle. Mosey's Private Company Governance Resource Center also collects guidance and insights on what directors need to keep top of mind as they prepare a company for a public offering.