Venture Round: The BEAT Goes On

When we wrote about CardioNet's IPO back in March, we had no idea it would hold such historical importance.

CardioNet, trading under the symbol BEAT, remains the last venture capital-backed company to go public this year, including both life sciences and technology plays. And we have to admit its doing the VC-crowd proud.

But the company is doing so well one could argue it may have sold more shares than it had to.

You may recall the cardiac monitoring company entered into a unique structure with investors back in spring 2007 when it raised $110 million in a Series E. Investors were given stock that converted into common shares during the IPO. The company's management took a bit of a gamble as there were repercussions if the company didn't get out in a timely manner.

Well, it did go out at the lowest price allowed by the deal--$18 per share. As we noted back in March, the conversion of those shares depended upon the IPO price. Had CardioNet gone out at $23 per share, which it initially had hoped to do, those Series E investors would have held 5.9 million shares.

But if CardioNet went out anywhere between $18-$20, the Series E shares converted to 7.2 million shares.

Today, CardioNet shares are trading at $27.50, making it a darling among IPO stock pickers, with a nearly 53% gain in three months.

It's interesting that if CardioNet priced its IPO at $23, more than four dollars below where it's trading today, the company would have had to hand over one million fewer shares to its Series E investors.

We're being a bit facetious, of course. CardioNet's stock didn't really take off until the company posted better than expected numbers in mid-April. So this is the case of a company doing what it needed to do to go public, and then going out and proving its value to shareholders.

At the time, the company clearly wasn't getting traction at $23 per share. In fact, $18 per share seemed rather generous. It apparently wasn't.

While we're engaging in some 20-20 hindsight, Boston Scientific--which acquired a sizable stake in CardioNet through its purchase of Guidant--sold off 1.5 million shares at the time of the IPO, recouping $27 million.

Had it held on, its stake would be worth more than $41 million today.

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Edmund de Rothschild Investment Partners more than doubled its assets under management for life sciences by closing on €150 million last week for its third life sciences fund. The Paris-based firm previously raised €80 million and €26 million for its second and first funds, respectively, according to VentureWire Lifescience.

The firm expects to invest the new fund in 15 to 20 life science companies across all stages of development, including biopharmaceutical, medical device and diagnostic companies, mostly in Europe.

According to the firm, its investors include most of Edmond de Rothschild Investment Partners' life science existing investor base, including La Compagnie Financière Edmond de Rothschild, La Caisse des Dépôts and Amgen. Other investors include health insurance companies, public pension funds, social institutions and institutional investors.

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Attention any other venture firms in the market with new funds, save the postage. Washington State Investment Board isn't interested, according to a recent post on Private Equity Hub.

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Three Arch Partners, still investing its 2004 vintage fund, probably won't be in the market for a new one until next year.

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Fresh from the "I made a seven minute presentation to a bunch of lawyers and investors, and all I got was a lousy...." file.

As always, if you have any private suggestions, tips, or if you really, really, really hate the idea that we'll be running this column on Wednesdays instead of Fridays email me here.

(Image courtesy of Flickr user RWK through a Creative Commons license.)