S-Ray is following a dual path exit strategy. One path is very typical for a startup – sell to a larger company. The other path is to stay independent and take the stock public. Both paths provide investors with a way to sell stock and recapture their investment and expected profits.
S-Ray has tailored its day-to-day operations to enable simultaneous progress on both paths. There are 3 main points to this effort:
- Minimize the investment and expenses. This enables the company to remain independent and utilize favorable capital only when needed. Many startups are forced into a low value sale when they spend too quickly and face a cash shortfall.
- Minimize staffing and overhead. There are two aspects to this style. The first is that a team suitable for a startup effort is rarely the team that can manage a publicly traded company. The second is that an acquisition by a larger company can be hindered by having to deal with unneeded staff.
- Minimize product definition. While an innovative startup like S-Ray has dozens of opportunities in the transition into digital dentistry, providing a low cost, high accuracy full arch scanner is our primary and initial goal. Until that product is a reality, we cannot move forward with any additional products to enhance the value of our product or company. We can conserve development to essentially work the same way we can conserve cash for essential expenses.
S-Ray is quickly reaching a point where substantial resources are going to be required to pursue each of the dual paths.
Discussions with large companies that have expressed interest in buying S-Ray now require dedicated engineering time to satisfy technical due diligence. S-Ray pays for this effort and puts product development on hold while doing so. It also opens up more risk as large companies continue to consider a “make or buy” cost – would it be less expensive and faster to just do an ultrasound startup or buy S-Ray?
Submitting documents and information to the Securities and Exchange Commission is a rigorous, very detailed and expensive process – but necessary for an IPO. This effort requires capital and extensive management time as well as increasing the management of the company – something that runs counter to the point of limiting staff.
On March 15, 2017 we started a 60 day period – ending May 15, 2017 – to allow for the following:
- Solicit and receive $3 million in commitments for additional capital to be used for FDA approval, product manufacturing and IPO preparation.
- Engagement with a BlackRock executive to develop plans for an IPO or sale including changes to the management team, a debt structure and a liquidity event for shareholders.
- Testing of the financial market for an S-Ray IPO with a $4 per share opening day price.
It is our expectation that the work being done over the next 60 days will clarify which of the dual paths will provide the best outcome for our shareholders and enable us to do so about the time of FDA clearance of our first product – ClearView SCAN.
We are looking forward to 2017 and the prospect of an IPO!