JAMS SAN FRANCISCO DAILY JOURNAL THURSDAY, OCTOBER 10, 2013 PAGE 5 Stradling assisting on IPOs By Dominic Fracassa Daily Journal Staff Writer S tradling Yocca Carlson & Rauth PC has helped two San Diego-based biotechnology compa- nies in the past two weeks an- nounce plans to conduct initial public offerings. At least eight biotech compa- nies with headquarters in the life sciences hub of San Diego have taken to the public mar- kets in 2013. Tandem Diabetes Care Inc. disclosed its IPO plans Mon- day. The company, which devel- ops consumer-friendly insulin pumps, intends to raise up to $100 million on the Nasdaq stock exchange, according to the preliminary public fling. Stradlings team on Tandems planned offering was led by Newport Beach shareholder Bruce Feuchter with support from shareholders Ryan C. Wilkins and by Timothy F. OBrien, who splits his time between Newport Beach and San Diego. Stradling is also counseling Biocept Inc., which indicated in a Sept. 23 fling with the Securi- ties and Exchange Commission it will seek $23 million in an IPO on the Nasdaq. San Diego shareholders Michael J. Brown and Hayden J. Trubitt and New- port Beach shareholder Mi- chael L. Lawhead are leading the team advising Biocept. According to their frst publicly available flings, both Tandem and Biocept took ad- vantage of a provision in the Jumpstart Our Business Start- ups Act of 2012 permitting com- panies with less than $1 billion in revenue initially to fle their registration statements conf- dentially with the SEC. Clifford Chance US LLP is counseling the underwriting syndicate in connection with Tandems offering. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC is representing the underwriters in Biocepts IPO. Stradlings attorneys couldnt comment on either IPO di- rectly, citing a self-imposed quiet period following the of- fering announcements. But in an email to the Daily Journal, Lawrence B. Cohn, chair of the frms life science practice group, said Stradling is posi- tioning itself to take advantage of opportunities arising out of the biotech industrys contin- ued push to raise money in the public markets. We view our involvement in these offerings as a continuing step arising out of our many years of deep involvement in this community, Cohn wrote. For the past few years the only viable exit for the founders of and investors in emerging growth life science companies has been through acquisition by a global consolidator or pri- vate equity fund. Now, the IPO market is more open. Its a trend that has kept other corporate lawyers busy this year, including San Di- ego-based Cooley LLP partner Charles S. Kim. Kim said hes currently working on a double- digit volume of biotech IPOs, about half of which are for San Diego companies. Kim said the furry of IPO activity coming out of San Diego is likely attributable to two things: market timing and managerial talent. During the nations economic recession, many biotech companies had to put the brakes on their plans to go public and are only restart- ing their efforts now that the window into public markets has been reopened, he said. Other IPOs are the products of serial entrepreneurship experienced management teams selling a company and then starting up a new venture that, in some cases, gets taken public. The more I do this, the more I see how critical the manage- ment is, Kim said. Having a great management team with vision is absolutely critical in having these companies suc- ceed. dominic_fracassa@dailyjournal.com Attorneys are helping two San Diego- based biotechnology companies go public Double escrow deals rise Elkins has seen a variety of deals go double escrow, and the ones that do so are going for not unsub- stantial gains, which are taxed at the standard short-term capital gains rate. Ive seen it in multiple types of properties, Elkins said. Theyre not doing it if theyre only going to be making a modest return. Although initial buyers may re- joice at turning a quick proft, sell- ers, particularly sophisticated par- ties, may try to avoid having their properties go into double escrow, since they get the lower of the two sale prices while a middle person locks in a gain. Sellers can put a clause in the contract that says the buyer may not negotiate with other sellers at a higher price, thus pre- venting a double escrow deal. But if the contract is silent, said Rick Angel, who handles commer- cial transactions out of the Los An- geles offce of Angel Law Offces, the general principle of the law is you can assign and transfer the contract at a higher price. While there has been double escrow fraud a California man was recently jailed and fned $3.5 million regarding a fraud scheme in Las Vegas the issue doesnt have to do with the transaction. It has to do with the actor, Elkins said. With the double escrow, single escrow, theres always a pos- sibility of a bad actor. Aside from contractual clauses, there are other obstacles to doing double escrow deals. With commercial properties, its not as easy to double escrow, said Michael L. Matkins, a Los Angeles-based founding partner of Allen Matkins Leck Gamble Mallory & Natsis LLP. You have to get fnancing, have to get a ten- ant estoppel certifcate, the docu- ment identifying the status of the propertys leases. But such obstacles arent stop- ping buyers both those who didnt intend to double escrow but got the quintessential offer they couldnt refuse, and those who snapped up properties on the cheap with the thought of fipping before the close from doing double escrow deals. The latter investor sometimes buys groups of properties and tries to double escrow them as a single bundle to a large investor. Knowing, for example, that companies like Colony Capital LLC and The Blackstone Group LP are on buying sprees, inves- tors might say to homeowners, If nobody else will pay you $100,000 for your house, I will, Matkins said. Then you go to Blackstone. Maybe Blackstone doesnt want to buy a $100,000 house. Ive got 10 of these, so you can close on $1 mil- lion. That saves Blackstone time. And what makes double escrow deals particularly interesting, El- kins said, is that they play out in different ways, not following any particular sequence of events. Its not always three-way. It may be two separate two-way nego- tiations, Elkins said. It requires a lot of balancing. Theyre certainly very doable. andrew_mcintyre@dailyjournal.com Continued from page 1 Alexander Drecun / Special to the Daily Journal Keith Elkins of Elkins Kalt Weintraub Reuben Gartside LLP has advised parties on double escrow transactions. BROWN FEUCHTER TRUBITT THURSDAY, OCTOBER 10, 2013 www.dailyjournal.com LOS ANGELES Reprinted with permission from the Daily Journal. 2013 Daily Journal Corporation. All rights reserved. Reprinted by ReprintPros 949-702-5390.