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Stradling assisting on IPOs
By Dominic Fracassa
Daily Journal Staff Writer
tradling Yocca Carlson
& Rauth PC has helped
two San Diego-based
biotechnology compa-
nies in the past two weeks an-
nounce plans to conduct initial
public offerings.
At least eight biotech compa-
nies with headquarters in the
life sciences hub of San Diego
have taken to the public mar-
kets in 2013.
Tandem Diabetes Care Inc.
disclosed its IPO plans Mon-
day. The company, which devel-
ops consumer-friendly insulin
pumps, intends to raise up to
$100 million on the Nasdaq
stock exchange, according to
the preliminary public fling.
Stradlings team on Tandems
planned offering was led by
Newport Beach shareholder
Bruce Feuchter with support
from shareholders Ryan C.
Wilkins and by Timothy F.
OBrien, who splits his time
between Newport Beach and
San Diego.
Stradling is also counseling
Biocept Inc., which indicated in
a Sept. 23 fling with the Securi-
ties and Exchange Commission
it will seek $23 million in an
IPO on the Nasdaq. San Diego
shareholders Michael J. Brown
and Hayden J. Trubitt and New-
port Beach shareholder Mi-
chael L. Lawhead are leading
the team advising Biocept.
According to their frst
publicly available flings, both
Tandem and Biocept took ad-
vantage of a provision in the
Jumpstart Our Business Start-
ups Act of 2012 permitting com-
panies with less than $1 billion
in revenue initially to fle their
registration statements conf-
dentially with the SEC.
Clifford Chance US LLP is
counseling the underwriting
syndicate in connection with
Tandems offering. Mintz,
Levin, Cohn, Ferris, Glovsky
and Popeo PC is representing
the underwriters in Biocepts
Stradlings attorneys couldnt
comment on either IPO di-
rectly, citing a self-imposed
quiet period following the of-
fering announcements. But in
an email to the Daily Journal,
Lawrence B. Cohn, chair of
the frms life science practice
group, said Stradling is posi-
tioning itself to take advantage
of opportunities arising out of
the biotech industrys contin-
ued push to raise money in the
public markets.
We view our involvement in
these offerings as a continuing
step arising out of our many
years of deep involvement in
this community, Cohn wrote.
For the past few years the
only viable exit for the founders
of and investors in emerging
growth life science companies
has been through acquisition
by a global consolidator or pri-
vate equity fund. Now, the IPO
market is more open.
Its a trend that has kept
other corporate lawyers busy
this year, including San Di-
ego-based Cooley LLP partner
Charles S. Kim. Kim said hes
currently working on a double-
digit volume of biotech IPOs,
about half of which are for San
Diego companies.
Kim said the furry of IPO
activity coming out of San
Diego is likely attributable to
two things: market timing and
managerial talent. During the
nations economic recession,
many biotech companies had to
put the brakes on their plans to
go public and are only restart-
ing their efforts now that the
window into public markets
has been reopened, he said.
Other IPOs are the products
of serial entrepreneurship
experienced management
teams selling a company and
then starting up a new venture
that, in some cases, gets taken
The more I do this, the more
I see how critical the manage-
ment is, Kim said. Having a
great management team with
vision is absolutely critical in
having these companies suc-
Attorneys are helping
two San Diego-
based biotechnology
companies go public
Double escrow deals rise
Elkins has seen a variety of deals
go double escrow, and the ones
that do so are going for not unsub-
stantial gains, which are taxed at
the standard short-term capital
gains rate.
Ive seen it in multiple types of
properties, Elkins said. Theyre
not doing it if theyre only going to
be making a modest return.
Although initial buyers may re-
joice at turning a quick proft, sell-
ers, particularly sophisticated par-
ties, may try to avoid having their
properties go into double escrow,
since they get the lower of the two
sale prices while a middle person
locks in a gain. Sellers can put a
clause in the contract that says the
buyer may not negotiate with other
sellers at a higher price, thus pre-
venting a double escrow deal.
But if the contract is silent, said
Rick Angel, who handles commer-
cial transactions out of the Los An-
geles offce of Angel Law Offces,
the general principle of the law
is you can assign and transfer the
contract at a higher price.
While there has been double
escrow fraud a California man
was recently jailed and fned $3.5
million regarding a fraud scheme
in Las Vegas the issue doesnt
have to do with the transaction. It
has to do with the actor, Elkins
said. With the double escrow,
single escrow, theres always a pos-
sibility of a bad actor.
Aside from contractual clauses,
there are other obstacles to doing
double escrow deals.
With commercial properties,
its not as easy to double escrow,
said Michael L. Matkins, a Los
Angeles-based founding partner
of Allen Matkins Leck Gamble
Mallory & Natsis LLP. You have
to get fnancing, have to get a ten-
ant estoppel certifcate, the docu-
ment identifying the status of the
propertys leases.
But such obstacles arent stop-
ping buyers both those who
didnt intend to double escrow
but got the quintessential offer
they couldnt refuse, and those
who snapped up properties on the
cheap with the thought of fipping
before the close from doing
double escrow deals.
The latter investor sometimes
buys groups of properties and tries
to double escrow them as a single
bundle to a large investor.
Knowing, for example, that
companies like Colony Capital
LLC and The Blackstone Group
LP are on buying sprees, inves-
tors might say to homeowners, If
nobody else will pay you $100,000
for your house, I will, Matkins
said. Then you go to Blackstone.
Maybe Blackstone doesnt want to
buy a $100,000 house. Ive got 10
of these, so you can close on $1 mil-
lion. That saves Blackstone time.
And what makes double escrow
deals particularly interesting, El-
kins said, is that they play out in
different ways, not following any
particular sequence of events.
Its not always three-way. It may
be two separate two-way nego-
tiations, Elkins said. It requires a
lot of balancing. Theyre certainly
very doable.
Continued from page 1
Alexander Drecun / Special to the Daily Journal
Keith Elkins of Elkins Kalt Weintraub Reuben Gartside LLP has advised
parties on double escrow transactions.
Reprinted with permission from the Daily Journal. 2013 Daily Journal Corporation. All rights reserved. Reprinted by ReprintPros 949-702-5390.