Ebb & Flow

Mellon Financial has been offering its Direct Equity product - an alternative to traditional equity financings - to many capital-intensive industries. Now the firm wants to start making inroads in biotech. Mellon thinks that its vehicle has advantages over both follow-ons and PIPEs, and that Direct Equity can reduce a company's equity financing costs by about 50%.

With Direct Equity a company first files a shelf registration - an S-3 with modified language. When the company wants to raise money, it would let Mellon know the amount it wants to raise. The company also would set a floor price below which it will not sell shares. From there, Mellon would amass bids from its network of investors. The bids would be delivered to the company, which then selects the investors to whom it will sell stock...