Unlike for large public companies, capital formation for middle market companies is a minefield for the unwary. Varying degrees of trading liquidity, equity research coverage, and C-Suite and director experience often lead to equity capital market transactions that are sometimes needlessly dilutive.
To make matters worse, there are no report cards issued for capital raising in the public company ecosystem. A public company seeks $50 million in growth financing, and secures it. The officers and directors think the financing was terrific. In fact, their investment bankers confirmed it. But down the street, the hedge funds that supplied the growth capital are literally laughing all the way to the bank. This happens hundreds of times a year, to the tune of $30b+.
We’re going to hear precisely how and why from the perspective of someone who co-managed an investment fund that invested in more than 500 such small-cap growth financings.