![going public
Initially as I tried to reach out to traditional money managers a month, and spent a few days in each place meeting exclu-
to tell the RHEO story, it felt very much like I was talking into sively with locally-based hedge fund managers. I also launched
the wind. Then it dawned on me: Given their compensation a hedge fund-dedicated TLC World e-news service to pro-
structure and different approach to risk management, the then- vide extra historical, industry and scientific perspective for the
emerging hedge fund community was much more likely to money managers; very quickly, I became the go-to person for
embrace the RHEO opportunity. I had just read an article on hedge fund managers wanting to learn about anything that had
the NIRI Web site arguing that, contrary to popular belief, less to do with AMD.
than five percent of U.S. hedge funds had a short bias. And
Lets Do an IPO!
despite this important fact, many IROs, CFOs and CEOs were
After about ten months of this kind
reportedly still reluctant to interact with
of marketing to U.S. hedge funds, TLCs
them. I recognized that the added ben-
stock had risen more than 500 percent.
efit of targeting hedge funds was that I
One day, feeling absolutely Herculean,
wouldnt be competing with very many Initially as
I tried to I walked into my CEOs office and pro-
other issuers trying to get the same reach out to
claimed that I could take our Vascular
audiences attention. traditional
money managers Sciences subsidiary public if he and
Hedge Fund Strategy to tell the RHEO
story, it felt
TLCs board wanted me to. He agreed
My strategy was to start very slowly, very much like I without too much hesitation, but made
was talking into
building relationships with the man- the wind.
it conditional upon my personally man-
agers of smaller hedge funds with aging the transaction all the way from
less than $50 million under manage- underwriter recruitment/selection, to
ment and vetting the companys prospectus drafting, to road show design
story with them. After some refinement, and execution with the noted excep-
the story became ready for prime-time and I turned to this tion of me having to give any public presentations on my own. I
group of small hedge fund managers for personal introductions also had to continue being TLCs sole IRO throughout the process.
to the institutional sales desks and the respective personalities We decided to list the IPO on both NASDAQ and the TSX, the
that they relied on most. latter largely in order to accommodate TLCs by-now minority
With the help of these sales desks, I organized and executed Canadian shareholder base. Vascular Sciences had no real infra-
an expert tour with a knowledgeable and somewhat folksy structure of its own (no internal council and no permanent CFO)
TLC optometrist from Oklahoma to [expertly, of course] dis- and didnt have audited financial results. We were forced to run a
cuss Dry AMD and the RHEO treatment with money managers. rather cumbersome dual process where we the issuers council,
We traveled to one or two major cities, usually once or twice underwriters council, the lead bankers and I worked on the
10 may 2 0 0 8 investor relations update](https://image.slidesharecdn.com/kilmernirimay08irupdate-130215072719-phpapp01/85/Kilmer-niri-may08_ir_update-4-320.jpg)
Kilmer niri may08_ir_update
- 1. update INVESTOR RELATIONS Article Reprint EDITOR Hank Boerner A S S I S TA N T E D I T O R AND PRODUCTION MANAGER Melissa Jones CO P Y ED ITO R My Company Went Patricia Reuss, Write-for-You EDITORIAL ADVISORY BOARD Public and Valerie Haertel David Olson Linda Kelleher Brian Rivel Michelle Levine Maureen Wolff-Reid All I Got Was This Peg Lupton Bill Walkowiak D IRECTO RS Bina Thompson, Chair T-shirt K. Blair Christie Catherine Mathis Derek Cole Nicole McIntosh Sally Curley Jeff Morgan Don De Laria David Prichard Carol DiRaimo Elizabeth Saunders Geoffrey G. Galow Douglas Wilburne Barbara Gasper Bradley Wilks Jenny R. Kobin Mona Zeehandelaar Ian Bacque, CIRI Representative By Stephen Kilmer IR Update is published monthly by the National Investor Relations Institute as a service to its members. Annual subscriptions are available to nonmembers: $175. ISSN 1098-5220 息 2008 by the National Investor Relations Institute. All rights reserved. Web site: www.niri.org. Reprint permission granted by NIRI. FOR SUBSCRIPTIONS OR CHANGE OF ADDRESS, CONTACT: NIRIIR Update, 8020 Towers Crescent Drive, Suite 250, Vienna, VA 22182, Phone: (703) 506-3570, FAX: (703) 506-3571, e-mail: amumeka@niri.org Annual e-subscriptions for nonmembers: $75 ADVERTISING: Scott Oser, Advertising consultant, Phone: (301) 279-0468, e-mail: soser@niri.org PLEASE SEND QUERIES, SUBMISSIONS AND REPRINTS REQUESTS TO: Melissa Jones, Manager, Marketing Communication, Phone: (703) 462-2207, e-mail: mjones@niri.org. REPRINT FEES PER ARTICLE: Electronic copy Adobe Acrobat PDF file Authors only: $75, Members: $200, Nonmembers: $300 Web posting or e-mail distribution: $500 Hard copies: Quantity under 10: $10/copy Quantities 10100: $5/copy May 2008 An estimate will be provided for quantities over 100. All prices are subject to a signed agreement.
- 2. going public My Company and All I Got Went Public Was This T-Shirt By Stephen Kilmer F ollowing a brief and as market by storm and, by it turned out mostly 1999, our stock was trading at unremarkable stint as 10x sales and our trading ratio an Investment Advisor at a on NASDAQ vs. the TSX was major Canadian brokerage, and easily 75/25. Then, without then as an account director warning, a severe and pro- at CCN Matthews (now tracted price war devastated Marketwire), I was directly the LASIK industry. While introduced to the wonderful we eventually went on to world of IR in 1997 by win (that is, to survive) the accepting the position of man- industry price war, our stock ager of investor relations with Toronto, Ontario-based LASIK eye was crushed beyond recognition and both the sell and buy sides surgery pioneer, TLC Vision Corporation. had gone from loving it to hating it and finally to just not wanting (Coincidentally, this was my first client win to ever think or speak about the stock again. while at CCN.) Then, after a very long time dutifully spent thinking, salva- While I progressed on a rewarding and tion finally came in the form of a $6 million investment that ulti- steady career path from manager to director mately gave TLC control of a Tampa, Florida-based private oph- to vice president at TLC, unfortunately thalmic device company, Vascular Sciences Corp, which was in the the companys fortunes werent quite so process of developing a novel blood filtration procedure RHEO smooth. The first years were marked by absolutely hyper busi- to treat the dry form of an eye condition called age-related ness and stock price growth. The company had taken the U.S. macular degeneration (Dry AMD). The Florida company had a 8 may 2 0 0 8 investor relations update
- 3. going public controversial past and retinal specialists were generally skeptical became very clear to me quickly. Some 13 million people in the of both the company and its technology. The private managers, United States are afflicted with Dry AMD and about eight million therefore, had great difficulty raising the capital needed to com- could reasonably be expected to benefit from the RHEO proce- plete their clinical trials. dure. Large market. The voodoo quality of the RHEO The procedure consists of eight treat- procedure hadnt, however, put TLC ments; each treatment required one off one bit. After all, it wasnt too many disposable RHEO filter set that we our stock was years prior that a large percentage of crushed beyond planned on selling to service providers recognition eye doctors had dismissed LASIK as at $1,200.00 per. Therefore, every one and both the complete heresy and very quickly sell and buy percent penetration into the available sides had gone LASIK grew to be the worlds most market would generate $768 million from loving widely-performed elective surgical pro- it to hating in treatment set sales (8 million eligible it to just not cedure. Everything we had seen in our patients x 1 percent x 8 treatment sets x wanting to ever clinical due diligence process, including think or speak $1,200). Keeping in mind that this was about it again. an interim analysis of the pivotal trial a Medicare-eligible patient population, data, led us to believe that the acquired there was no competing treatment and, companys procedure was effective in if left untreated, patients faced losing treating Dry AMD. their vision and their independence. It followed that the investment thesis was extremely binary: If Needed: The Investment Story the full pivotal trial data was positive and the FDA approved the While we were convinced, external stakeholders largely ignored procedure, the market could be worth billions of dollars; if FDA the important corporate developments. The investment story declined, the market would be worthless. zu creates investor friendly websites. zu makes shareholders smile. Forget PDFs. Forget mail-outs. Go online. Our online annual reports and websites win international awards. Welcome to world-class investor relations. Welcome to zu. zu.com | online investor relations experts investor relations update M ay 2 0 0 8 9
- 4. going public Initially as I tried to reach out to traditional money managers a month, and spent a few days in each place meeting exclu- to tell the RHEO story, it felt very much like I was talking into sively with locally-based hedge fund managers. I also launched the wind. Then it dawned on me: Given their compensation a hedge fund-dedicated TLC World e-news service to pro- structure and different approach to risk management, the then- vide extra historical, industry and scientific perspective for the emerging hedge fund community was much more likely to money managers; very quickly, I became the go-to person for embrace the RHEO opportunity. I had just read an article on hedge fund managers wanting to learn about anything that had the NIRI Web site arguing that, contrary to popular belief, less to do with AMD. than five percent of U.S. hedge funds had a short bias. And Lets Do an IPO! despite this important fact, many IROs, CFOs and CEOs were After about ten months of this kind reportedly still reluctant to interact with of marketing to U.S. hedge funds, TLCs them. I recognized that the added ben- stock had risen more than 500 percent. efit of targeting hedge funds was that I One day, feeling absolutely Herculean, wouldnt be competing with very many Initially as I tried to I walked into my CEOs office and pro- other issuers trying to get the same reach out to claimed that I could take our Vascular audiences attention. traditional money managers Sciences subsidiary public if he and Hedge Fund Strategy to tell the RHEO story, it felt TLCs board wanted me to. He agreed My strategy was to start very slowly, very much like I without too much hesitation, but made was talking into building relationships with the man- the wind. it conditional upon my personally man- agers of smaller hedge funds with aging the transaction all the way from less than $50 million under manage- underwriter recruitment/selection, to ment and vetting the companys prospectus drafting, to road show design story with them. After some refinement, and execution with the noted excep- the story became ready for prime-time and I turned to this tion of me having to give any public presentations on my own. I group of small hedge fund managers for personal introductions also had to continue being TLCs sole IRO throughout the process. to the institutional sales desks and the respective personalities We decided to list the IPO on both NASDAQ and the TSX, the that they relied on most. latter largely in order to accommodate TLCs by-now minority With the help of these sales desks, I organized and executed Canadian shareholder base. Vascular Sciences had no real infra- an expert tour with a knowledgeable and somewhat folksy structure of its own (no internal council and no permanent CFO) TLC optometrist from Oklahoma to [expertly, of course] dis- and didnt have audited financial results. We were forced to run a cuss Dry AMD and the RHEO treatment with money managers. rather cumbersome dual process where we the issuers council, We traveled to one or two major cities, usually once or twice underwriters council, the lead bankers and I worked on the 10 may 2 0 0 8 investor relations update
- 5. going public front part of the book while our interim CFO worked with the or moral obligation I have no choice but to take with me to the external auditors to complete the financial section. grave, we finally filed the S1 for the spin-out of Vascular Sciences now renamed OccuLogix in August 2004. Following Enter the Speculators SEC review of the document (OccuLogix was incorporated in About half way through drafting, conflicting speculation on Delaware), the drafting and filing of amendments, and more, our TLCs plans for Vascular Sciences emerged. On one side, a large IPO road show was launched approximately 13 weeks later. The and well-known hedge fund reportedly initiated a significant tour brought us to 15 North American cities over 14 business short position in TLC, theorizing that no attempt would be days. Our original pricing range was $8-$10, but that was raised made to IPO the RHEO business and, even if there was, the IPO to $10-$12 about half way through marketing. We priced at $12 would fail. After establishing their position, they (according to (33 percent above the original filing mid-point), raising $100 reliable sources) paid or otherwise encouraged a small inde- million at a post-money valuation of $525 million. pendent research shop to put out a series of very negative and inflammatory reports on both TLC and the RHEO procedure. In Lesson: Tailor the Audience to the Message contrast, Canadas national daily newspaper started to run uncon- By tailoring our audience to our message instead of the other firmed stories that an IPO was imminent and that the analysts way around, and by embracing non-traditional investment man- were expecting it to be a huge success. agers instead of running away from them, we were able to pull off the impossible. OccuLogix was reportedly the first non-FDA That T-Shirt approved/pre-revenue medical device company to successfully go This is about the time that the t-shirt comes in. A friend on public on a major U.S. exchange in over a decade. It was also the the sales desk of a lead underwriter sent me an over-the-top largest healthcare IPO in Canadian market history. Most impres- and once-in-a-lifetime invitation. Picture this opportunity for sively (I think), TLC achieved $295 million in aggregate cash the IRO of small-cap: The private helicopter picks me up in and paper gains primarily from its Toronto and brings me to the front lawn retention of 53 percent of OccuLogix of a rented mansion in the fabled Long shares through the OccuLogix IPO Island Hamptons. There, 20 or so of in return for its original $6 million Americas most successful and wealthiest To his credit, he did send investment. hedge fund managers, a few institutional me an official End of story: I moved exclusively to salespeople and this IRO are to enjoy a u.S. open T-shirt (two OccuLogix from TLC following the fully-catered weekend attending the U.S. sizes too IPO and, after many more twists and Open at nearby Shinnecock Hills Golf small) to make up for turns, recently left to co-found my own Club. I felt like a rock star! Because we my loss. IR agency in Toronto. While I feel had already engaged the underwriters, equally comfortable operating on both and TLC trusted me to keep our plans sides of the northern border, I believe for Vascular Sciences to myself, I was now that my true niche is in helping given the green light by management Canadian and other non-U.S. issuers to accept the invitation. My dreams successfully navigate and penetrate the U.S. capital markets. were quickly dashed when the bankers got wind of the plan. There were many hard-won lessons for me coming out of the They believed the risk that I might let something slip, however IPO and I hope that NIRI IR Update readers can benefit from remote, wasnt worth taking. They instructed the salesperson to some of the story as told here by a former corporate IRO. And, I un-invite me. To his credit, he did send me a t-shirt (two sizes am keeping the T-shirt. IRU too small) to make up for my loss. The OccuLogix IPO in 2004 Steve Kilmer is co-founder and managing partner of Kilmer-Lucas. E-mail him at stephen@kilmerlucas.com. Web site: www.kilmerlucas.com After an extraordinary amount of effort by all parties, and a series of underwriting group intrigue that out of legal and/ investor relations update M ay 2 0 0 8 11