It was the OTC Bulletin Board trading venue that Longport
ascended to in 1994, having completed a private offering of shares
the year before. In several ways, trading on the OTC Bulletin Board
accounts for the success, past and future, of Longport.
"Being public and offering investors some form of liquidity
or exit strategy played a big role in our ability to raise
additional funds and commercialize our technology," says
McGonigle. He estimates that Longport has raised an additional $4
million since the company's first offering in 1993. Some of
this fund-raising has been plain vanilla, such as the sale of
additional shares of common stock to new investors. Many companies
are able to accomplish this because they price the common stock
they are selling privately at a slight discount to the prevailing
prices in the public market, thus enticing potential new investors
with an immediate gain.
In addition, Longport has been able to enjoy a fairly robust
valuation. With 17.5 million shares outstanding at a prevailing
price of $3 per share, Longport is valued at more than $52
million--not bad for a development-stage company with four
employees. And of course the stakes owned by Longport employees
have made them wealthy, at least on paper, and perhaps someday for
real.
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Another benefit to Longport being public is that the company
already has its exit strategy in place--meaning a way for investors
and founders to cash out if the company succeeds. Many companies
face the real risk of building a successful enterprise and then
having the market melt down on them when they decide to go public,
scuttling their dreams for public ownership. Companies that come
very close to doing an IPO only to have the IPO window close on
them may never be able to get back, even when market conditions
improve. They're perceived as damaged goods. "The way we
did it means that regardless of what the IPO window does, we're
already public," says McGonigle. "If the company does
well, we hope it causes the price of the stock and the value of the
company to go up."
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