ATM Offerings: What Issuers Need to Know

Monthly
Webinar
Series

presents

At-‐the-‐Market
Offerings:
What
Issuers
Need
to
Know

November
8,
2012

Panelists

Sara
LaFever

Account
Manager

Sagient
Research

Greg
Curhan

Managing
Director
Investment
Banking

MLV
&
Co.

Adam
Epstein

Founding
Principal

Third
Creek
Advisors,
LLC

Moderator

Brett
Goetschius

Publisher
and
CEO

Growth Capital Investor

Thank
you
for
participating
in
“At-‐the-‐Market
Offerings:
What
Issuers
Need
to
Know.”

This
manual
contains
information
you
will
need
to
prepare
for
this
webinar.

CONFERENCE
MANUAL

This
manual
contains:

•Dial-‐in/log-‐on
instructions.

Speaker
bio
and
contact
information.

•Tips
for
submitting
questions.

•Pertinent
information
from
the
pages
of

Growth
Capital
Investor.

CONFERENCE
DETAILS

The
webinar
is
scheduled
for
Thursday,

November
8,
2012
at
2:00
p.m.
EST,
1:00

p.m.
CST,
12:00
p.m.
MST,
and
11:00
a.m.

PST.
It
will
last
110
minutes.

HOW
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Conference Manual Page 1

SPEAKER
BIOS
AND
CONTACT
INFORMATION

Sara
LaFever
is
an
account
manager
at
Sagient
Research
Systems.
Sara
began
her
career
with
Sagient
as
an
analyst,
and
transitioned
into
a

position
in
the
sales/marketing
team.
She
works
with
three
of
Sagient’s
products:
BioMedTracker,
PlacementTracker,
and
CatalystTracker.

She
received
her
BA
from
New
York
University
and
is
pursuing
a
master’s
in
library
and
information
science
from
San
Jose
State
University.

CONTACT

Sara
LaFever

Account
Manager

Sagient
Research
Systems

858-‐200-‐2357

slafever@sagientresearch.com


SSaaggiieenntt RReesseeaarrcchh SSyysstteemmss
SSaarraa LLaaFFeevveerr

102
264
89
21
86
157
29
55
76
ATM
(At
the
Market)
Offering
Common
Stock
Common
Stock
-‐
CMPO/Overnight
Offering
Common
Stock
-‐
Rights
Offering/Reset
Common
Stock
-‐
Shelf
Sale
(Registered
Direct)
Convertible
-‐
Fixed
Convertible
-‐
Floating/Reset/Company
Installment
Non-‐Convertible
Debt/Preferred
Stock
Structured
Equity
Line

}  Only 1 ATM in
2006
}  Popularity rose
2009
}  Exploded in 2010
}  Continues to
expand 0
20
40
60
80
100
120
ATMs
2012
(YTD)
2011
2010
2009
*Date range based on closing date

REITS Healthcare
Energy Financial
Industrial Other
  Healthcare includes Biotech & Pharma
  Energy includes Oil & Gas, Pipelines
  Financial includes Banks, Closed-end Funds, Diversified Financial Services,
Investment Companies
  Industrial includes Electronics, Transportation, Engineering
  Other includes Utilities, Technology, Mining, Communications
*Data from 2009-present

0
10
20
30
40
50
60
70
80
90
71
83
33
44
49
22 18
Market
Cap
Market
Cap
Ø Most ATMS
issuers are in
100M-500M
range

}  ATMs YTD:102
}  CMPOs YTD: 89
}  CMPOs tend to be
popular in the
healthcare sector

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AAvveerraaggee SSuumm ooff
GGrroossss PPrroocceeeeddss
AAvveerraaggee
CCoommmmiittmmeenntt
AAmmoouunntt
ATM 2.54% $46,741,445.65 $140,109,207
CMPO 5.65% $48,575,205.68 N/A

Ranking Placement Agent Name Deal Count
11.. BBaannkk ooff AAmmeerriiccaa MMeerrrriillll LLyynncchh
50
22.. CCaannttoorr FFiittzzggeerraalldd && CCoommppaannyy
47
33.. MMLLVV && CCoo.. LLLLCC 38
44.. WWeellllss FFaarrggoo SSeeccuurriittiieess,, LLLLCC
34
55.. DDeeuuttsscchhee BBaannkk SSeeccuurriittiieess,, IInncc..
25
66.. CCiittiiggrroouupp GGlloobbaall MMaarrkkeettss,, IInncc..
24
77.. JJ..PP.. MMoorrggaann CChhaassee && CCoo.. 21
88.. MMoorrggaann SSttaannlleeyy 20
99.. KKeeyyBBaanncc CCaappiittaall MMaarrkkeettss
19
1100.. UUBBSS SSeeccuurriittiieess LLLLCC
17

Greg
Curhan
is
Managing
Director
and
Head
of
Technology
Investment
Banking
at
MLV
&
Co.
Mr.
Curhan
joined
MLV
in
2011
to
expand
its

focus
to
Technology
sectors
for
ATM
financings,
as
well
as
to
broaden
the
firm’s
offerings
to
other
strategic
advisory
and
investment

banking
services.
Prior
to
MLV,
Mr.
Curhan
was
President
of
CleanTech
Capital
Consulting,
Inc.,
where
he
advised
companies
and
their

boards,
often
serving
as
a
director
himself.
Prior
to
this,
Mr.
Curhan
was
President,
Chairman
of
the
Commitment
Committee
and
Head
of

the
CleanTech
investment
banking
team
of
Merriman
Curhan
Ford
&
Co.,
which
he
cofounded.
Merriman
Curhan
Ford
raised
more
than

$5
billion
for
its
corporate
clients
and
provided
advice
on
a
number
of
M&A
transactions
during
his
tenure.
Mr.
Curhan
brings
more
than

25
years
of
experience
helping
finance,
manage,
and
advise
fast-‐growing
companies
in
rapidly
changing
technology
industries
typically

backed
by
Silicon
Valley
venture
capital.

CONTACT

Greg
Curhan

Managing
Director
and
Head
of
Technology
Investment
Banking

MLV
&
Co.

415-‐840-‐2203

gcurhan@mlvco.com


Proprietary and Confidential
October 2012
Raising capital more efficiently
At-the-Market Issuance (“ATM”)

Disclaimer
The information contained herein is confidential and is intended solely for the use of the
addressee(s). It shall not be construed as a recommendation to buy or sell any security and/or
participate in an At-the-Market-Issuance. Any external companies information provided herein is
used as an example only and is not to be considered as indicative of the results achieved by your
company. Any unauthorized access, use, reproduction, disclosure or dissemination is prohibited.
The information provided shall not be disseminated to another party without the prior written
consent of MLV & Co LLC. Neither MLV & Co LLC nor any of its subsidiaries, affiliates,
officers, or employees shall assume any legal liability or responsibility for any incorrect, misleading
or altered information contained herein.

What is At-the-Market Issuance?
n  At-the-Market Issuance (“ATM”) enables an S3 eligible issuer, who’s share are listed on a
national exchange (NASDAQ, NYSE, etc), to opportunistically sell equity at its discretion, at
the prevailing market price
q  The Company dictates the timing and price at which it raises capital
q  Minimum threshold price is set solely by the issuer (e.g. “sell up to 200,000 shares at $7.00 or better”)
q  No discounts and no warrants
n  Seamless implementation of ATM with S-3 Shelf Filing
q  Up to a maximum dollar amount of stock sales; ATM agreement effective for the life of the shelf registration
q  However, ATM does not preclude any other capital raising alternatives (no impact on shelf capacity unless it is
used)
q  This is a tool to be used at will, to expand your capital access alternatives
q  ATM reported retroactively in 10-Qs
n  Having an ATM facility in place would enable you to:
q  Capitalize on Catalysts: Leverage on equity appreciation in real time (volume and/or price spike due to news flow
or macro events)
q  Service Working Capital Needs: ATM can be tailored to raise capital on an as needed basis to maintain treasury and
manage the balance sheet
q  Temper financing risk /downside associated with punitive deal structures
q  Increase liquidity and exposure, cross blocks with institutions seeking to build up a position

Benefits of ATM issuance include:
n  Cost effectiveness of selling shares at the market price
n  Access to equity capital without impact on pricing of a traditional offering
n  Can be done discretely, raising significant proceeds over time
n  At all times, issuer decides timing, minimum price, volume
n  Highly streamlined and cost effective execution
n  Once ATM is in place, the company can use it opportunistically at times of positive
stock price movement
n  The issuer is never required to use it and is never precluded from doing anything else
Benefits of At-The-Market (ATM)
ATM is a capital raising methodology which provides an issuer the ability to sell publicly
traded shares – common and/or preferred - at the prevailing market price at the time and
amount of its choosing

ATM History – Increasing Popularity
n  During the financial crisis ATM became a primary source of capital for financial
institutions
n  In 2009, one-third of the major TARP recipients used ATM to recapitalize
n  Bank of America raised approximately $12.5B for itself through ATM over a 2-week
period in May 2009
n  Other users included Fifth Third Bancorp, KeyCorp, Commerce Bancshares, E Trade,
PNC, SunTrust, and Hartford
n  Approximately 50 REITs have used ATM – a majority of the sector. Many have used
ATM multiple times
n  Other capital intensive industries such as metals & mining and biotech are frequently
using ATM
n  ATM is a highly efficient means of raising capital for a business within any industry

>$1B
45%
$500M
-‐
$1B
13%
$250M
-‐
$500M
13%
<$250M
29%
2012
Thru
Q3
ATM History: Growing Market Share
Sources: Dealogic, Thompson Reuters, SEC Filings
Data as of 10/1/2012
Year Number of ATM Deals
2005 10
2006 23
2007 14
2008 58
2009 119
2010 104
2011 123
2012 thru Q3 104
Total 555
Follow
On,

601 Follow
On,

534
Follow
On,

435
Follow
On,

457
ATM,
119 ATM,
104 ATM,
123 ATM,
104
0
100
200
300
400
500
600
700
2009 2010 2011 2012
thru

Q3
Number
of
Deals
ATM
Offering
Trends
ATM accounted for ~20% of all shelf take downs in the first three quarters of 2012
>$1B

35%

$200M-‐
$1B

31%

<$200M

34%

2010

>$1B

41%

$200M-‐
$1B

22%

<$200M

37%

2011


Proceeds per dollar:
Follow-On or
Bought Deal
PIPE
ATM maximizes proceeds vs. Alternative Offerings
Follow
On Fee,
5c Market
Discount,
10c
Proceeds
to Issuer,
85c
ATM Fee,
3c Market
Discount,
0c
Proceeds
to Issuer,
97c
PIPE
Fee, 5c Market
Discount,
12c
Cost of
Warrants,
5c
Proceeds
to Issuer,
78c
ATM

When can ATM be used:
§  Anytime except around an 8K filing
§  Not subject to insider trading windows
Indicative volume parameters followed by MLV as % of daily volume of an
issuer:
n  No sales on flat to down trading day
n  Up to 33% on a day where stock is up less than 2%
n  Up to 50% on a days where stock is up less than 5%
n  As much as 75% of the volume on any given day
n  Typically most of the capital would be raised for an issuer over 5 trading days during the month
How Often Can ATM be Used?
For an issuer of more than $75mm in free float there is no limitation on size of ATM filing;
below $75mm free float a company is limited to 33% of the free float in any single ATM filing
When the share price is up, an issuer has the ability to expand
volume by taking advantage of pent up demand.

n  ATM can also be use to issue Preferred Shares
n  Once issued and outstanding, a series of Preferred Stock can be used to raise additional proceeds at any time
through ATM
n  The process for putting a new series of preferred stock in place can be completed within three weeks, is highly
cost effective and requires very limited management time (including no road shows).
n  An ideal issuer candidate would have a Market cap > $200M and would have positive cash flow
Attributes of Perpetual Preferred
n  Trades on a listed exchange such as the NYSE or AMEX (par is usually $25)
n  Non-convertible and perpetual
n  Callable at par after three years
n  Yield comparable to that of corresponding senior notes
n  No covenants
n  Essentially analogous to a “capped” common
n  No arbitrage/shorting of the common typically associated with a convertible preferred
n  Ongoing financing vehicle that can be accessed for future capital requirements
n  Attractive to retail investors looking for yield
Perpetual Preferred

Why Choose ATM?
n  Flexibility. Ability to sell shares at the market price (no discount, no warrants, no upfront fees) at
anytime
n  No Price Impact. Historically no/minimal price impact upon implementation of an ATM program,
unlike other shelf takedown products
n  Quality of placement. Investors that buy through ATM are “natural buyers” actively seeking to acquire
the stock at the market price (even if at a premium to average daily price)
n  Low all-in-cost of issuance. By being opportunistic shares can be sold at a significant premium to the
average trading price over time resulting in less dilution
n  Opportunistic Capital Raising. Provides the ability to take advantage of the volatility in the stock or
market vectors
n  Public Offering. Unlike certain equity line and registered direct products, as well as PIPEs, ATM is a
public offering, thus not subject to “20% limitation”
n  Control. Significantly increases the ability to manage a company’s cash position and fine tune debt/
equity ratios
n  Normal Course Reporting. Disclosure of ATM sales done in normal course of quarterly reporting
n  Ease of Implementation. Easy to put in place, does not subject issuer to SEC review if effective shelf
registration in place
ATM is another arrow in a Company’s capital raising quiver.

Adam
Epstein
is
a
corporate
director
and
a
special
advisor
to
small-‐cap
boards
and
investment
funds
through
his
firm,
Third
Creek

Advisors,
LLC
(“TCA”).

He
is
the
author
of
The
Perfect
Corporate
Board:
A
Handbook
for
Mastering
the
Unique
Challenges
of
Small-‐Cap

Companies
(New
York:
McGraw
Hill,
December
2012).
Mr.
Epstein
is
lead
director
of
OCZ
Technology
Group,
Inc.
and
a
member
of
the

National
Association
of
Corporate
Directors
(“NACD”).
He
is
an
NACD
Board
Leadership
Fellow,
the
highest
level
of
credentialing
for

corporate
directors
and
corporate
governance
professionals.
Mr.
Epstein
is
a
regularly
featured
speaker
at
national
corporate
governance

forums
and
investor
conferences,
and
is
a
small-‐cap
features
contributor
to
Directorship
magazine.
Prior
to
founding
TCA,
Mr.
Epstein
co-‐
founded
and
was
a
principal
of
Enable
Capital
Management,
LLC
(“ECM”).
During
his
tenure,
ECM’s
special
situation
hedge
funds
invested

in
more
than
500
small-‐cap
financings
in
the
United
States,
the
European
Union,
and
Australasia.

CONTACT

Adam
Epstein

Corporate
Director
and
Special
Advisor

Third
Creek
Advisors,
LLC

415-‐730-‐1915

ae@thirdcreekadvisors.com


Growth Capital Investor’s Monthly Webinar Series
At‐the‐Market Offerings: What Issuers Need to Know
November 8, 2012
Adam J. Epstein
© 2012 Third Creek Advisors, LLC

The Registered Offering Continuum
 Clarifying the registered vs. unregistered divide
 Differentiating ATMs from other registered offerings
 Registered direct offering (“RD”) vs. ATM
 Confidentially marketed public offering (“CMPO”) vs. ATM
 Fully marketed follow‐on offering vs. ATM
 Equity line vs. ATM

Prudent Board Analysis
 Is an ATM right for your company
 Amount of capital required vs. gating factors
 Timing of capital needs
 Volatility of stock
 Business visibility
 Shareholder base
 Review of peer company ATM data is mandatory
 Most common board mistake: functionally outsourcing this decision
to third parties

Special Considerations for Selecting ATM Bankers
 Process: ATMs have high degree of continuing interaction
 Conflicts:  unique conflicts of interest can arise in ATM settings
 Availability: ATMs aren’t always available for use
 Trading:  not all ATMs are executed as artfully as others
 References: nothing can replace speaking to former clients
 Data: investor reaction to ATM announcements speaks volumes
 Fee:  last, but certainly not least, what will it cost

Negotiating, Announcing & Administering an ATM
 Address potential conflicts of interest (e.g., proprietary trading,
market making, etc.) in ATM agreement
 Pay particular attention to placement procedures & availability
provisions in ATM agreement
 Communicating an ATM to the Street
 3 C’s of ATM administration
 Communication
 Cooperation amongst related parties
 Compliance

Investment ($B) Deals
0
$1
$2
$3
$4 billion
May June July Aug. Sept. Oct.
48
40 39
44 43
51
Growth Equity Private Placement Activity
Source: PlacementTracker, a service of Sagient Research.
September data thru 10/31/12.
Vol. I Issue 8 The Journal of Emerging Growth Company Finance November 5, 2012
Equity Line andATM
Promoters Eye Same Niche
by Joe Gose
T
he growing appeal of at-the-market offerings among emerging growth
companies has introduced more competition into the micro cap fi-
nancing market, particularly for investors and banks that provide
structured equity lines – a segment of the market that already is highly com-
bative.
But while emerging growth companies have pared the number of equity
line agreements they’re inking, the structure continues to appeal to a substan-
tial number of issuers that need cash and that often have few other options. In
some cases, ATMs have failed to live up to their billing.
“It has been a little bit challenging – there certainly has been competi-
tion created by the ATM structure,” said Jason Cohen, a representative with
Westlake Village, Calif.-based Financial West Group, which has facilitated
five equity line deals with commitments totaling $125 million this year. “But
we have found that people have had variable results with that structure and
are dissatisfied because they haven’t been able to piece together capital in any
predictable pattern.”
To a large degree, ATMs and equity lines provide issuers with the same
benefits: They generally allow companies to raise equity in the amount and at
the time of their choosing without extensive pre-deal marketing or other sales
SunTrust under SEC Investigation
by Teri Buhl
A
tlanta-based SunTrust Banks (STI) is under investigation by regula-
tors for alleged mortgage fraud against Fannie Mae. Whistleblowers
who worked in SunTrust’s residential mortgage underwriting group
filed a whistleblower suit with the Securities and Exchange Commission this
spring. After the Washington, D.C. office of the SEC received the complaint
a director of the SEC’s Atlanta office and a forensic accountant were assigned
to begin an immediate investigation in the bank. Three people involved in
the case told Growth Capital Investor interviews with SunTrust employees who
worked in the bank’s mortgage unit started in May, along with an inspection of
the methods SunTrust used to qualify prime loans sold to Fannie Mae.
SunTrust saw its stock price fall off a cliff in the financial crisis, and subsequent-
ly participated in the federal TARP program aimed at shoring up distressed banks.
Investors who held the stock valued at $73 a share in October 2007 watched their
investment wiped out when it fell to $7 by February 2009. Distressed investors
IN THIS ISSUE
SEC’s Hunt for Abnormal Returns
Plows Ahead
YorkvilleAdvisorscaseareminderthathedgefunds
aren’t the only ones pursuing big alpha..............2
October Turns Ghoulish for Growth
Companies
Market volatility played more tricks than treats on
growth companies closing EPPs in October.......3
Modest IPOs, Secondaries Follow
Facebook Face Plant
Late month revival of emerging growth company
initial and secondary public offering filings........4
ALSO INSIDE
SEC Accuses Yorkville of Earning Millions from
Inflated FundValues;Spun Fund Keeps Equity Line
Focus;KeatingBDCOffersCapitaltoPre-IPOIssuers;
OnlineMarketsInnovatorLupowitzMovesonfrom
DirectMarkets; Rodman Team Moves on to Wall
Street Access; Battery Makers Running Low; New
Oriental Education Making a Comeback?; other
stories and deals of note......................................3
EPP, PIPE & APO MARKET DATA
AggregateYear-to-Date MarketActivity.............15
PIPE and Growth EPP LeagueTables..................16
International EPPAgents,SPACs andAPOs.......19
See ATMs on page 20
See SunTrust on page 22

November 5, 2012 Copyright © 2012 MarketNexus Media, Inc. 20
efforts. They also have been a capital-raising stopgap during
volatile times marked by tight credit.
But data indicate that ATM issuers pocket proceeds more
frequently. In fact, a high number of equity line issuers never
tap their lines or draw only a small amount of proceeds over a
typical 24 to 36-month term.
Over the last 12 months, just seven of the 20 most active
equity line investors that have committed to 85 equity lines
have actually financed issuers, according to PlacementTracker,
a service of Sagient Research. (PlacementTracker at the be-
ginning of 2011 started posting draw downs gleaned from
company regulatory filings. Such information is frequently
delayed between the draw down and disclosure.)
Of the top 10 investors, Lincoln Park Capital entered
into 13 equity lines and has provided $6.9 million to issuers,
Aspire Capital Fund agreed to five deals and has provided
$4.2 million, and Acqua Wellington Asset Management
penned 3 agreements and has provided $44.6 million.
Lower Tier Presence
The proceeds disparity is apparent when comparing
emerging growth companies – those with a market capital-
ization of $10 million to $1 billion and a minimum $1 share
closing price – with issuers that fall below the $1 share price
threshold.
So far this year, investors have committed to providing
emerging growth companies with $219.5 million in 13 equi-
ty line deals. The transactions feature an average discount of
11.4%, and four issuers have received $6.4 million. On the
other hand, investors have committed $638 million to issuers
with less than a $1 share price in 62 equity lines priced at an
average discount of 12.3%. Of those, only four companies
have executed draw downs to raise $1.5 million.
Expectedly, issuers of more seasoned equity lines have
banked more cash. Emerging growth companies agreed to 24
equity line transactions totaling $494.5 million in committed
funding in all of 2011. Pricing in 21 of the transactions for
which information was available represented a 9% discount,
and so far 13 issuers have drawn $125.6 million.
Meanwhile, companies with a share price of less than $1
at agreement signed up for $988.6 million in 77 equity lines
in 2011. Pricing data available in 73 of the deals worked out
to an average discount of 11.7%, and 23 issuers have tapped
the lines for $162.2 million.
Emerging growth companies have set up 50 ATM offer-
ings this year with a total commitment of $2.5 billion. So far
issuers in 18 of the agreements have raised $230 million. Six
companies with a share price of less than $1 have agreed to
ATMs, and two have raised $61 million.
In 2011, emerging growth companies executed 43 ATM
offerings with an aggregate commitment of $2.2 billion. Issu-
ers of all but eight of those offerings have so far raised $628
million. All four ATM issuers with prices of less than $1 a
share in 2011 have raised 8.1 million so far, nearly a quarter
of the $35 million committed.
What Difference?
The migration of emerging growth companies toward
ATMs is partly due to regulations that have created more shelf
registration opportunities for companies on national exchang-
es, suggested Steven G. Martin, managing member of Aspire
Capital, a Chicago-based fund that makes direct investments
in publicly traded companies.
Martin sees little difference between the vast majority of
equity line structures and ATMs. Most equity lines feature
investors that sell an issuer’s shares into the market using for-
ward pricing – the price per share is generally based on a for-
mula that takes into account a discount to a volume-weighted
average price (VWAP) over a number of days after a draw
down notice. Investors typically have no investment risk and
may decline a draw down if trading volume parameters aren’t
met.
Similarly, ATMs feature an agent selling shares into the
market on a best-efforts basis for a commission. There’s no
obligation for the ATM agent to buy the shares, and the
agents have no investment risk.
“I don’t make that big of a distinction between ATMs
and traditional equity lines,” Martin said. “Allowing listed
companies to file a baby shelf registration statement has giv-
en ATMs even more applicability, but in either case you have
someone who is selling your stock into the market on your
behalf and giving you most of the proceeds without any in-
vestment risk.”
While Aspire Capital concentrates primarily on making
investments through open market purchases, registered offer-
ings and private placements, it also provides principal-based,
“firm committed ATM offerings” for what it considers to be
higher quality companies, he said.
Instead of forward pricing and volume requirements
typical in ATMs and equity lines, Aspire has no volume
requirements and employs a pricing mechanism based on
the stock’s performance over a number of days prior to the
purchase notice. The look-back approach involves more
risk, Martin said, as the fund is obligated to buy shares for
its account as principal. Aspire Capital typically becomes
a large shareholder rather than just a conduit to sell stock
into the market, he added. Besides taking real investment
risk with each purchase, Aspire Capital generally makes an
upfront investment, which other ATM providers won’t do,
he said.
ATMs continued from front page

November 5, 2012 Copyright © 2012 MarketNexus Media, Inc. 21
For that reason, Aspire Capital focuses on fundamentals
and avoids the issuers that frequently gravitate toward tradi-
tional equity lines: very small and thinly traded companies
that are desperate for cash. Often such companies want to be
able to show the market that they have access to financing,
Martin said, but in reality they lack meaningful access to cash
from the transaction.
“We don’t believe in the traditional equity line business,”
he said. “We don’t believe that equity lines – or ATMs – work
for companies that are desperate for money or do not have
good business prospects.”
In August, Aspire committed to provide San Diego-based
MediciNova (MNOV) up to $20 million over 24 months.
Typical of its deals, the purchase price is the lesser of the low-
est price of the company’s stock on the date of the draw down
notice or the average of the stock’s three lowest closing prices
over 12 consecutive trading days ending on the trading day
immediately preceding the purchase date.
Aspire initially bought more than 606,000 shares for
$1.65 each – the stock’s closing price on Aug. 2 when the
parties agreed to terms – for a total investment of $1 million.
MediciNova also paid Aspire an investor fee of more than
363,630 shares. The company’s shares were recently trading
around $1.90.
Active equity line investors employing a forward pricing
model include Terrapin Opportunity, a Mill Valley, Ca-
lif.-based fund that includes former officials from Acqua Wel-
lington and equity line placement agent Reedland Capital
Partners. The fund has committed $70 million to two issuers
over the last three months and generally used a forward pric-
ing mechanism similar to Acqua Wellington’s.
In October, Terrapin committed $20 million to St. Paul,
Minn.-based EnteroMedics (ETRM) and based the share
purchase price on a discount of 4% to 6.8% of the stock’s
volume weighted average price over ten trading days following
the drawdown notice, contingent upon a threshold price. The
shares were trading for $3.90 at announcement and were re-
cently trading around $2.85. Reedland Capital affiliate Finan-
cial West Group facilitated the deal and is receiving $2,000
per draw down.
Greg Curhan
Managing Director
MLV & Co.
Sara LaFever,
Sagient Research
Adam Epstein
Principal
Third Creek Advisors
This live-streamed 90-minute webcast includes live Q & A, presentation materials and archive access.
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TO REGISTER: http://growthcapitalist.com/events
Growth Capital Investor Monthly Webinar Series
Panelists:
At-the-Market Offerings: What Issuers Need to Know
Nov. 8, 2012 • 2:00 – 3:30 pm EST
Join our expert panel of investment bankers, investors and capital markets advisors as they discuss the benefits
and pitfalls of “At-the-Market” or ATM offerings, one of the most effective methods of raising capital available
to emerging growth companies today.
Learn from our panel of experts:
• Maximize the flexibility to control the timing and
amount of sales, and minimum acceptable price.
• Raise equity opportunistically to precisely match
the sources and uses of funds.
• Mitigate volatility by selling during periods of stock
price strength and slowing/halting sales during
periods of stock price weakness.
• Use the incremental nature of ATM sales to benefit
from a rising stock price.
• And much more.

Investment ($B) Deals
0
$1
$2
$3
$4 billion
Apr. May June July Aug. Sept.
49 48
40 39
44
41
Growth Capital EPPs 2012
Vol. I Issue 6 The Journal of Emerging Growth Company Finance October 1, 2012
ATMs On the Rise
by Joe Gose
P
rior to 2008, at-the-market (ATM) offerings were virtually non-existent. But
thanks to expanded shelf offering rules and a rough financing market, ATMs
are becoming more prevalent as growth companies pursue capital-formation
strategies. The offerings, which are conducted at the company’s request with newly
issued shares at market prices, in a short time have become more widely used than
equity lines.
This year more than $190 million has been raised of a total potential of over
$2 billion in 43 ATM offerings through the end of September by emerging growth
companies with market caps from $10 million to $1 billion, according to Placement-
Tracker. This year’s ATM deal pace has already matched that of all of 2011, when
$628 million was raised by issuers in 43 deals. And while early on real estate invest-
ment trusts (REITs) were the predominant ATM issuers, issuers in a broad range of
sectors are now employing the offerings, especially life science companies.
Traditionally life science issuers have raised capital around milestones, expect-
ing a positive market take on pending news that will lead to higher stock prices and
the ability to raise more money at higher valuations, said Todd Wyche, CEO of
New York-based Brinson Patrick Securities Corp., a boutique investment bank
that specializes in ATMs.
“But we know that milestones get delayed and/or news isn’t received as posi-
tively as issuers expected,” Wyche said. “When that happens, the issuers find them-
selves with very little capital and over a barrel in having to raise capital … in deal
structures that can be onerous and especially dilutive to existing shareholders.”
Oil Exploration Company
Weighs Debt Offering Over IPO,
Battles Hedge Fund
by Teri Buhl
W
hile Congress and stock market executives wring their hands over the
meek pace of IPOs on U.S. exchanges, emerging growth companies
with bankable assets are turning to the huge supply of low-cost cap-
ital available from the convertible bond market. One such company, Starboard
Resources, an oil and natural gas exploration company, has held off a planned
IPO this year in favor for raising additional capital through the debt markets at
rock-bottom rates. But a battle among shareholders of a hedge fund that controls
the company may derail its growth prospects regardless of its capital access.
San Antonio-based Starboard was created out of the distressed assets of bank-
rupt Southern Texas Oil Company (STXX) by hedge fund manager Greg Imbruce
INTHIS ISSUE
Regulation A’s Destiny a Big
Unknown
SECsilentonpromiseofexpandedsizeandbroad-
ened investor eligibility.....................................2
With Rodman & Renshaw Scattered,
EPP Banking Biz Up for Grabs
Sunset of prolific placement agent leaves the PIPE
market with a void..................................................3
JP Morgan Snafu Shows Ribotsky
Still Acting as NIR Fund Manager
Duelingfundvaluationreportsshowformermanager
still trying to influence LPs.......................................3
ALSO INSIDE
LifeLock IPO Highlights Keating Shift from Reverse
Mergers;Real Estate Capital Redefined;SEC,FINRA
Bust Algo Busters; SpongeTech Inquiry Leads to
Another Sanction; Hedge Fund Complication at
HeartofWesternPacificAction; B.Riley&Co.Places
EMCORE CMPO; $25.7M Registered Direct from
Insmed; Spectrum Group Offers $25.5M in Rights,
Stock;other stories and deals of note.....................4
EPP, PIPE &APO MARKET DATA
AggregateYear-to-Date MarketActivity................11
PIPE and Growth EPP LeagueTables....................12
International EPPAgents,SPACs andAPOs..........15
See ATMs on page 16
See Oil on page 17

October 1, 2012 Copyright © 2012 MarketNexus Media, Inc. 16
Indeed, traditional PIPE costs can total 30% when factoring
in placement agent fees, a steep price discount to attract inves-
tors, and warrants, he said. Thus, it’s understandable why life
science companies as well as growth companies in general are
putting ATM programs in place, he added. ATM agents that sell
a growth company’s shares into the market generally charge com-
missions of 2% to 3%.
Boards of directors, however, frequently don’t know how to
comparison shop between ATM programs and other financing
options once an issuer has an effective shelf, said Adam Epstein,
founding principal of Danville, Calif.-based Third Creek Advi-
sors, a provider of corporate finance and capital markets guid-
ance to small cap companies.
In particular, Epstein said, boards may not appreciate how
much money a company really needs or whether trading volume
is sufficient to raise capital in a timely manner. Boards also need
to consider what kind of deal is going to cause the least amount
of dilution: Because ATM issuers sell shares off a shelf, they’re
also eligible for registered direct offerings and confidentially mar-
keted public offerings (CMPO), he added.
Lastly, he said, boards need to perform due diligence on
stock price performance during prior ATM financings handled
by banks to see if there are any conflicts of interest.
“I don’t think there’s anything wrong with ATMs in the-
ory – I think it’s a great idea,” Epstein acknowledged. “There
are just a few issues that boards need to appropriately take into
account.”
Expanding Slice of EPP Market
The rapid growth of ATM issuance is clear evidence that
EGC management teams consider ATMs a great idea, too. The
rising number of growth company ATMs continues a decidedly
upward trend from 2008, when such companies put just four
programs in place.
“One of the factors that has been driving the adoption of at-
the-market offerings is that CFOs and management teams want
to have more tools in their financing toolkit; they don’t want
to be overly reliant on any one way to raise capital,” said Wy-
che, whose firm, among other engagements, is acting as exclusive
agent for Opexa Therapeutics’ (OPXA) $2.6 million ATM.
“As time goes on, more companies are hearing about ATMs and
about the success that peers are having in raising capital, and so
they’re putting programs into place.”
It appears that ATMs are putting a dent in equity line deals,
too. While equity line activity has generally been volatile from
year to year, issuers in 2012 have so far put 10 equity lines in
place totaling $157 million. In all of 2011, companies agreed to
24 equity lines valued at $495 million.
“A number of issuers we’re talking to have either replaced
their equity lines with ATMs or are talking about doing it,” Wy-
che said.
Broadening Appeal
What’s more, growth companies from a variety of sectors are
taking up ATM programs. In 2009 more than half of the issuers
were real estate investment trusts (REITs). But in 2011, biotech
and pharmaceutical companies were behind 15 of the 43 ATMs,
while REITs launched seven deals.
So far this year, biotech and pharmaceutical issuers have ac-
counted for 14 of the 43 agreements and REITs have announced
12. Issuers in the oil and gas, healthcare products and financial
sectors are also well represented among ATM users. On the other
hand, REITs continue to use the vehicle with the most frequency
in deals involving issuers with market caps exceeding $1 billion.
So far this year, they’ve accounted for 29 of the 42 large cap
ATMs.
Another difference between small and large companies
using ATMs is showing up in the cost of capital. On average
this year, growth companies are paying commissions of 2.7%
while issuers with market caps exceeding $1 billion are paying
1.8%.
Also this year, share prices of ATM issuers have declined an
average of nearly 2% three days following the announcement of
an agreement. Biotech and pharmaceutical companies saw their
share prices slide about 3% three days following an announce-
ment, while REIT shares were higher by 1.1%.
By comparison, stock prices at issuers that have completed
CMPO and registered direct deals this year have dipped 2.5%
three days following the deals. Biotech and pharmaceutical com-
pany shares have ticked down an average 1.3% three days after
ATMs continued from front page
ATM Growth
Investment ($M) Deals
0
$10
$20
$30
$40
$50
$60
$70 million
2008 2009 2010 2011 2012*
4
14
32
43 43

October 1, 2012 Copyright © 2012 MarketNexus Media, Inc. 17
such transactions. (The CMPO/registered direct three-day per-
formance calculation excluded a deal issued by Rosetta Genom-
ics (ROSG), which saw its shares skyrocket a dataset-skewing
240%.) CMPO and registered direct issuers paid placements
agents about 5.8%, on average.
West Plains, N.Y.-based Acadia Realty Trust (AKR) has
had one of the most successful capital-raising campaigns of any
issuer that has commenced an ATM program in 2012. The com-
pany announced a $75 million offering in late January when its
shares were trading for $21.12, and its shares were 20.5% higher
on Sept. 24. The shopping center REIT raised $65.7 million by
the end of the second quarter in drawdowns that had an esti-
mated average price of $22.18 a share. In August, Acadia Realty
announced a $125 million ATM offering.
The REIT agreed to a 2% fee in both transactions, which
feature Bank of America Merrill Lynch, Barclays Capi-
tal, Deutsche Bank Securities and Wells Fargo Securities as
co-agents. Goldman Sachs & Co. has been added to the agent
roster for the second deal.
Cambridge, Mass.-based Zalicus (ZLCS), meanwhile, has
fulfilled two ATM offerings of $15 million each this year. But
the stock price of the developer of pain and inflammation drugs
plummeted in mid-September when it decided to scrap its rheu-
matoid arthritis therapy following poor clinical results.
Zalicus announced its first program in early January when
its stock was trading for $1.27 a share, and it sold stock through
late March for an average price of $1.07 a share. The issuer
launched its second ATM offering in June, when its stock was
trading for $1.44 a share, and received an estimated average price
of $1.15 a share for its stock. Its shares were recently trading
around 82 cents.
Exclusive selling agent Wedbush PacGrow Life Sciences
earned a fee of 2.5% in the first transaction and a fee of 2% in the
second.
of Stamford-based AYSM Energy Investments. Starboard hired
Aegis Capital to underwrite its IPO this year but later terminated
the engagement after management decided it needed to explore
more drilling from its existing wells and acquire more oil and gas
contracts to build up the value of the company before it attempted
an initial offering. CFO Eric Alfuth, who worked on debt offer-
ings with AIG Investments, tapped Knight Capital to do a 144-
A high yield senior secured bond offering at 12% interest with a
three-to-five year maturity. Warrants would include a 35% equity
call-back if the company went public before the bond matured.
The company, which is owned by investors in Imbruce’s
hedge fund, currently has only $2 million of debt. Starboard’s
board is weighing the risk of taking on secured debt to build out
the company’s balance sheet over selling the firm to another oil and
gas company at a smaller valuation.The controlling investor group
could recover about 5 times their $13 million investment if they
sold Starboard on the private markets for around its current value
of $60 million. But the goal is to get a higher return by building
up the firm for a $300 million IPO in a year and using proceeds
to pay off the $100 million high yield debt. To IPO now the firm
would need to overcome investor sentiment in a market worried
about regulatory uncertainty in oil and gas in an election year.
Last year another exploration and production firm, coin-
cidentally headquartered across the street from Starboard, used
the debt markets to raise $250 million in capital – an unusually
large offering for an E&P company. (PlacementTracker indicates
only two 144-A convertible debt offerings from E&P companies
in the past 12 months larger than $200M.) In December 2011
Global Hunter Securities issued a Strong Buy on Woodbine
Acquisition Corp., which offered a five-year bond with a 12%
coupon and warrants that converted to 70% of the equity if the
company sold before the bond matured. The bond and warrants
were trading for $98.75 on December 5, 2011 when Global
Hunter issued a price target of $182.
The market ate up Woodbine’s bonds, which are currently
trading at $107 for the bond and $47.50 for the warrants, for a
total of $154.50. Global Hunter is telling investors Woodbine is
expected sell in 2013 because it’s meeting its production and EB-
ITA targets. Starboard’s management has been watching Wood-
bine’s success with hopes to now use the debt markets to achieve
similar results by borrowing to build and then cashing out with
a sale or IPO.
Starboard’s entry into the public markets has been stalled by
a battle within the board when they learned the hedge fund man-
ager, Imbruce, who had helped revive the company, was accused
of fraud and breach of fiduciary duties by his largest investor
– an Irish family fund called SOS Ventures. Imbruce originally
acquired the shell of STXX by slipping in front of another hedge
fund, Summerline, via a $1.5 million Debtor-in-Possession or
“DIP” loan during Southern Texas Oil Company’s bankruptcy
proceeding in December 2009. He then used his investors’ mon-
ey to buy more distressed oil and gas leases along with royalty
rights and founded Impetro Resources in January 2010. Impetro
was sold into Starboard.
What Imbruce didn’t tell investors was he had moved some
of the oil and gas leases into another entity he solely owned out-
side of the fund, basically cutting his investors out of profits from
the assets if they struck oil. The scheme was uncovered when the
investors’ lawyer found legal documents showing Imbruce was
trying to sell their equity interest on the cheap for $18.5 million
to Summerline, who would then get a large put option that could
bankrupt Starboard if it didn’t IPO.
Oil continued from front page

ATM Offerings: What Issuers Need to Know

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