And Conduit Healthcare Solutions, a maker of consumer smart cards for the medical industry, will take a shortcut to do just that — and possibly become a model for other smaller companies to follow.
Instead of going the full-blown IPO route with a Wall Street broker, a path that would take a year and likely cost $1 million, CEO Dale Grogan said Conduit Healthcare would acquire an existing public company and go from there.
He added that the letter of intent to do so is already in place.
“This is what we’re going to do. This is not a shell deal and it’s not a blank-check company, because this particular company has never traded its stock,” he said.
The company is Northborough Holdings, a firm headquartered in Providence, R.I. Grogan knows Northborough’s principals well — most are securities attorneys — and feels they can help him get Conduit into the public market rather quickly.
“They have publicly audited financials, so they have to be an open book. We know that we are not buying any problems as we go through the process,” he said.
“These guys are so good. They know what the drill is. These aren’t a couple of yahoos from the hinterlands who fell off the truck. These guys know the deal. They’re securities lawyers,” he added. “Having their skills on hand will shorten the process by months.”
Filings with the Security and Exchange Commission that will allow the stock to be traded publicly still have to be done.
Grogan told the Business Journal that he hopes to have the acquisition completed by the end of July.
“We know where the perils lay and we can step around them.”
But as with most things in life and in business, time is of the essence for Grogan. He said the worst scenario for Conduit Healthcare would be to work hard and get 25 new hospitals on board by the end of the year, only to have someone else come in with a public offering and starts off with 500 hospitals as clients. “Then you’re out of business,” he said.
“Access to the capital really allows us to ramp up the sales and marketing and go after critical mass faster. Right now, we feel we have the first-mover advantage. So we need to capitalize on that.”
Lambert, Edwards & Associates, a local public relations consultant that specializes in investor relations, is helping Grogan take Conduit Healthcare public.
“We went with them because they’re the best at what they do, hands down,” said Grogan. “We’re going to need their investor-relations capabilities, not just the PR and telling the story to the local media, but to Wall Street.”
Main Street has reacted pretty well so far to Conduit Healthcare since Grogan moved the company here from Florida a few months ago.
Grogan said quite a few local investors have contacted him over the past 60 days about putting money into Conduit, and he isn’t hesitant about moving Conduit once more. But this time he will move the firm into the public realm, despite the shaky confidence investors have in Wall Street.
“I think that there is an absolute pent-up demand for small public companies. I think that if you’ve followed the cyclic history of the market, the next sector that will come in favor will be the small cap,” said Grogan.
“The large caps had a big ride for a long time and led the last market run forever, along with IT.
“If you look at small cap, health care, IT, I think those are the right places. The market needs and wants a good, smaller deal and I think we are that. I’m absolutely convinced of that.”