Abstract

http://ssrn.com/abstract=1927099
 


 



Financing Development Stage Biotechnology Companies: Reverse Mergers vs. IPOs


Mark Ahn


Creighton University - College of Business Administration

Robert B. Couch


Willamette University - Atkinson Graduate School of Management; Willamette University (Atkinson GSM)

Wei Wu


Willamette University (Atkinson GSM)

January 15, 2011

Midwest Finance Association 2012 Annual Meetings Paper
Journal of Health Care Finance, 38(1): 32-54, 2011

Abstract:     
We examine reverse mergers (RMs) in the biotechnology industry and find that, when compared to initial public offerings (IPOs), RMs are smaller, have significantly lower market valuations relative to size, and generally invest less. We also find that RMs exhibit positive abnormal returns on the announcement date and throughout the first year after the RM event. In looking at liquidity measures, we find that RMs tend to be less liquid than IPOs and that illiquidity is greater during the six-month lock-up period following the RM event. Thus, RMs may be an appropriate alternative financing vehicle in capital intensive, high-risk biotechnology companies which require accessing deeper and larger pools of investors in public capital markets across multiple milestone periods in a 'pay for progress' environment.

Number of Pages in PDF File: 32

Keywords: biotechnology, reverse merger (RM), initial public offering (IPO)

JEL Classification: G14

Accepted Paper Series





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Date posted: September 29, 2011 ; Last revised: November 22, 2014

Suggested Citation

Ahn, Mark and Couch, Robert B. and Wu, Wei, Financing Development Stage Biotechnology Companies: Reverse Mergers vs. IPOs (January 15, 2011). Midwest Finance Association 2012 Annual Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1927099 or http://dx.doi.org/10.2139/ssrn.1927099

Contact Information

Mark Ahn
Creighton University - College of Business Administration ( email )
United States
Robert B. Couch
Willamette University - Atkinson Graduate School of Management ( email ) ( email )
900 State Street
Salem, OR 97301
United States
Willamette University (Atkinson GSM) ( email ) ( email )
900 State Street
Salem, OR 97301
United States
Wei Wu (Contact Author)
Willamette University (Atkinson GSM) ( email )
900 State Street
Salem, OR 97301
United States
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