Recently, there are been speculation as to whether Globus Medical would go public. As to our knowledge, there has been no S-1 filing with the Securities and Exchange Commission. This information would be available on the website, www.sec.gov. This form would contain a complete description of the security and the terms of the sale. During the last year, word on the Street has been that Globus and Goldman were courting one another for a "dog and pony" show. Whether or not Goldman will be the underwriter forming the syndicate remains to be seen. Based on the recent activity at Globus, one can speculate that they are trying their hardest to execute an IPO. The first sign that Globus was being coached or influenced by an investment bank was when they started to transition their business model from an independent to direct sales force. Globus was willing to terminate their distribution agreements with some of their largest distributors. Contrary to popular belief, it is cheaper to maintain a direct sales force than it is to support an independent distribution model. Margins are much tighter with independent distributors, and investment bankers frown upon tight margins. As a caveat, any distributor that intends on investing in a start-up company should consider having their own exit strategy because it is just a matter of time and revenue that the company will look to dissolve its relationship while evolving as Globus did. But, will it be easy for Globus to go public? Based on the recent activity that has been reported on this blog spot, TSB believes that the albatross that hangs around Globus's neck is that it has been in litigation for patent infringement with multiple companies. Globus has litigated with Synthes, Warsaw Orthopedics and MDT, and has ongoing litigation with NuVasive. Not an endearing feature for potential investors. If anything now would not be the time to take a company public. Why?
When one evaluates the stock market a booming market doesn't necessarily mean a healthy economy, especially in medical devices. The market is commoditized and highly competitive yet for the "average investor" the margins are low. TSB is not predicting a crash. Yet, there must be some concern when the number of companies on the exchange has decrease by nearly 42% since 2008. Given this trend, does the potential exist for additional contraction? The number of IPO's has steadily declined. So why would Globus be attractive, when most people want to invest in tech stocks like Facebook? And why would David Paul want to take the company public when he is currently dealing with multiple distractions? The biggest advantage to running a privately held company is that the management team can concentrate on running the company rather than answering endless questions from analysts and investors. There is less pressure in meeting your quarterly earnings and the company avoids the regulatory burden of being a publicly run entity. In the spine industry, legacy companies like MDT, Zimmer, Biomet and NuVasive enjoy the pomp and circumstance of being publicly traded.
So will Globus go public? The potential exists. Will it happen in 2011? In all likelihood, no. If anything, TSB believes that Globus could be positioning itself for the sale of the company rather than taking it public, but that will not happen until there is some clarity and direction in the United States healthcare system. Until then, fasten your seat belts and enjoy the ride. TSB wants to know what its readers think?