Shoulder Innovations IPO proves heavy lift
Shoulder Innovations secured US$75m late on Wednesday from its NYSE IPO but had to price deeply below the range to satisfy price-sensitive institutional investors.
Morgan Stanley, Goldman Sachs and Piper Sandler placed 5m shares at US$15, four dollars below the low end of the US$19–$21 marketing range. The banks concentrated allocations, with the top five institutions that participated receiving 60% of the shares sold, led by long-only funds focused on healthcare.
Shares of the medical device fell to US$14.70 in Thursday's afternoon session before recovering to US$15.05 at the market close.
The IPO was a heavy lift. The free-float was 23% at a US$335m fully diluted market value.
Plagued by rising marketing and R&D costs, Shoulder expects to report a second-quarter adjusted Ebitda loss of US$18m–$20m on revenue of US$10.8m–$11.2m. Despite 30% top-line growth from US$8.2m, the adjusted Ebitda loss ballooned from US$3.2m a year ago.
In an unusual move, Shoulder sought to derisk the offering by raising US$40m earlier in July from the sale of a convertible bond.
That security, which contained a coupon step-up provision if the company did not go public by July 31 2026, converted into stock at 80% of the IPO price, increasing dilution at lower prices.
Regardless, Shoulder has enough cash to fund operations for at least one year, including US$30m of availability on a revolving credit facility.
The company is spending US$55m to expand its sales and marketing, and additional money to develop new products.
Shoulder employs AI software to help surgeons plan shoulder replacement surgery using its InSet surgical implants. Of the 1,503 InSet implant surgeries completed in the second quarter, 98% were planned using the company's ProVoyance software.