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Too Soon To IPO?: Case Study Analysis

The commentators analyzed whether Titrolyte should pursue an IPO or wait to further grow the company. They noted that Titrolyte is facing technical problems in reliably producing titanium and lacks proper financial controls and business processes expected of a public company. Most commentators recommended that Titrolyte focus on solving technical issues, improving business operations, and communicating its vision before pursuing an IPO in the next 2 years to attract long-term investors. One commentator suggested raising private funds or pursuing an acquisition in the short-term.

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222 views13 pages

Too Soon To IPO?: Case Study Analysis

The commentators analyzed whether Titrolyte should pursue an IPO or wait to further grow the company. They noted that Titrolyte is facing technical problems in reliably producing titanium and lacks proper financial controls and business processes expected of a public company. Most commentators recommended that Titrolyte focus on solving technical issues, improving business operations, and communicating its vision before pursuing an IPO in the next 2 years to attract long-term investors. One commentator suggested raising private funds or pursuing an acquisition in the short-term.

Uploaded by

pratz1996
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Too Soon To IPO?

Case Study Analysis

Radhika 80501190032
Vivek 80501190034
Rivea 80501190035
Priyanka 80501190036
Abhik 80501190037
Titrolyte - Part 1
● Diane Ashton and Sundeep Lal were working together at MIT on a titanium extraction project.

● Durable and highly heat resistant, titanium is a key constituent of many specialty alloys, but it's also very

expensive to produce.

● So when Diane discovered a solution that isolated titanium efficiently, the partners recognized that the

technology would be worth billions to large manufacturers.

● Sundeep and Diane secured a $20 million investment from a prominent VC and drew up a business plan. Within

six months of their discovery, Titrolyte Inc. was born.

● Diane- CEO and Sundeep- CRO


Reality Strikes

Diane and Sundeep soon discovered that what had been a fairly straightforward operation in the confines of an MIT lab
was difficult to reproduce on a large scale.

● Solution highly sensitive to temperature


● Solutions was not always reliable
● Process extremely sensitive to impurities
● Once solution stopped working, they had to start over again
● Raw material wasted was very expensive

In just two years, they had to go back to investors for more money.
Titrolyte - Part 2

Second Round Funding - Raised $60 million

Material Testing Service

- “A way to generate more cash” - Sandeep


- “Drains the resources from company’s core business” - Diane
- Result: Testing Revenue expected to touch $10 million

IPO Dilemma
Which Direction?

Sandeep Diane

- Ready for the IPO - Skeptical about IPO

Reasons: Reasons:

- New Unit started performing well - Impurity problem is not solved


- Company might miss the Bus - Absence of Formal Budgeting Process
- In -house capacity started generating cash - Company is losing its sense of Identity
Problem Statement:

“To analyse whether


Titrolyte should risk going
public or wait for the
company to grow”
Commentator’s
analysis
William Bourne
Investment specialist at Scudder investment in Tokyo

Analysis:
● It will run out of cash within a year which can be solved by an IPO.
● Funding from Republic Engines will lead to company using inside information
against Titrotyle to negotiate a deep discount. Revenues $15mn
● Amateur investors tend to desert companies when the investment trend
changes so it is better to rely on professional investors Expenditure $30mn
● Lack of reliable budgeting processes and competent treasury operations.
Funds $100mn
● Lots of technical problems - Spent $100mn without solving impurity problems.

Verdict: To look for options apart from IPO and Funding from RE.

Suggestions:
● Look for a technology partner to solve technical problems, eg: Republic engines
● Refocus investment from R&D to Speciality chemicals testing.
Tim Draper
Founder and MD of a leading VC firm - Draper Fisher Jurvetson

Analysis:
● IPO could provide a substantial infusion of capital and continued access to the capital market.
● Investors want to invest in companies who want to change the world and not just focused on
financial reward.
● Unclear corporate vision: Goal was to produce titanium not to provide material testing services which
has lead to an ambiguity in communication of corporate vision.
● Company going for an IPO should not be occupied with payroll and budgeting problems..

Verdict: They should think about having an IPO but not yet. .

Suggestions:
● Diane should discuss her concerns with her partners and the board
● Start preparing for the IPO and communicating clear corporate vision
Sarah Mavrinac and Neil Jones
Analysis:

● Once the company goes public, the market bets on it's performance potential
● At the time of IPO, investors will look at issue’s quality, support of VC, talent of research staff,
product development stage etc.
● Post IPO, they look at how company is managed: Good decision making structure, well developed
internal systems, strong communication
● IPO need to be for long term focus of company not short term fundraising

Comments on Titrolyte:
● Reporting system is very weak; would need to spend 250,000 to 500,000 dollars to maintain
such processes.
● Lack of robust communication network

Verdict : Titrolyte falls short in terms of time talent and money required for an IPO
David Perry
Analysis:
● Three options- IPO/ Raise cash privately/ Look for an acquirer
○ Raise Cash Privately :Easy to raise money from private investors, less risk and transaction costs
are low, no sensitive information would leak,concern to bring technology to market
○ Go Public : IPO would generate more cash, Liquid market for the stock would help cash the
rewards, Executives would have to manage shareholders expectation, New people wont find an
incentive to join the company, Existing employees would look to leave

● Titrolyte is not upto public company standards(poor treasury functions and HR functions)

Verdict: Diane and Sundeep should start preparing Titrolyte for an IPO at a later stage(6 months from now)

Suggestions:
● Interview Investment Bankers to get a valuation of the company after the IPO
● If the valuation is > $200 million then RE should be approached for half the amount
● The sum borrowed would be on terms that the company is valued at $ 3 billion
Recommendations

● Set a timeframe ( approx two years)


● Focus on proper business system, improving HR
● Focus on developing better business communication with shareholders and employees
● Primary focus on their main job i.e. titanium extraction
● Appoint someone to take care of the management duties
● A CFO should be hired to handle the finances
● Once the internal problems are solved - GO FOR IPO.
THANK YOU

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