Wednesday, October 7, 2009

$1.3mm - $29.5mm = A Negative ROI

The Spine Blogger received a call from an industry source this evening regarding the Vertebron/CardoMedical deal. Interestingly enough this is what was reported to us from someone close to this organization. Supposedly, Cardo offered Vertebron $29.5 million dollars. So if Vertebron generated $11mm in revenues that would be a multiple of 2.68 of revenue. Not bad, considering that last year our economy was in meltdown mode.

So why didn't the deal go down? Supposedly, one of the founders, a board member, refused to sign off on the deal! HELLO! We're talking $29.5 million, like in samolee's, like in banana's. So the outcome is that the company files for bankruptcy and the is sold in an auction. Now there's a stroke of genius. Today, the board is being sued by various parties. Now here is a case study for Wharton, Stanford, Kellogg, and the Harvard Business School.

You know, sometimes, just sometimes people are as dumb as a bag of rocks!


  1. The Cardo offer was composed primarily of their thinly traded stock. When considering their offer, one would have to take into account the inability to liquidate. The stock has traded between .60 and $1 in the last few days. That is quite a pill to swallow when you're talking about an offer ostensibly worth $29.5 mil, but could be $17.7 mil by lunch.

    I suspect had it been cash on the barrelhead, nary a dissenting voice would have been heard.

  2. I will take $17.7 over $1.3 any day of the week. The board member that didnt sign was the CEO. And shortly after not signing, he made his own offer to buy the company for $600,000. Hopefully the lawsuit has legs and they take him to the cleaners like he did to his employees, his suppliers and his investers.

  3. Tex: I concur that if it had been cash, the Three Wise Men would have taken the money and ran. Yet, based on how they ran this company, it was better getting out, than staying in. One way or another they will pay a price. The legal system will determine their fate!

  4. The same thing happened with IST though. They were offered a lot more money from Biomet and Integra prior to the auction. They are just too greedy and believe that their products and IP are worth much more and there will be a bidding war during the auction.

    This seems to be an industry trend lately. Most startups think that their ideas are worth Charite' and even Kyphon money and they will have all the Bigs outbidding each other for the technology in 2-3 years.

    Hopefully, the medical device players (investors, CEOs, and surgeons) will learn from the mistakes over the past 1-2 years and have more realistic goals, which should develop better business plans and drive more true innovation (great products with proven clinical data). This will help patients tremendously, help the FDA realize what works (instead of approving devices who provide the most pressure on them), and bring in more funding to the sector.

  5. Does anyone know whether Cardo assumed Vertebron's debt? If they did, then $1.3 mil may not be such a bargain. Vertebron's creditor list (and lawsuit list) is long - I wonder if Cardo will have to make good on some of that.

  6. Spine Doc1: Our sources say that Cardo did not assume Vertebron's debt.