Big Deals Q2: Behind the Deal: DGS Advises Mesa Labs in “Down the Fairway” Stock Offering Raising $150 million

Davis Graham & Stubbs partner John Elofson led Mesa Laboratories in a $150 million public offering of common stock that closed in mid-June. 

The Lakewood-based company provides products and services for quality control in the health care, pharmaceutical, industrial safety, environmental and food and beverage industries.  

“They’re interestingly positioned in the COVID world,” Elofson said. “Some of their business lines have been adversely impacted, but some may benefit as well. So, it’s not a straightforward story, necessarily, in terms of the impact of the pandemic on their business.”

Elofson said his DGS colleague Elizabeth Vonne brought Mesa Labs to the firm as a client a couple years ago, and she has since gone in-house at the company (but remains of counsel at the firm). They worked together on a common and convertible offering a year ago, which meant they were in “pretty good shape” to pull off the most recent transaction in terms of organization and documentation. 

“I would say it’s a pretty down-the-fairway capital markets transaction,” Elofson said. “When you have a strong track record and a story to tell like they do, it tends to make the process go smoothly.”

When it comes to capital markets transactions, Elofson said, you can’t plan too far in advance since pulling off the deal depends on an ever-changing market. “There’s always a tension in any capital markets deal between having your documentation and the rest of the process lined up,” he said, “and shooting at a moving target, the market.” 

As far as general trends in raising capital right now, it all depends on the industry, Elofson said, making the pandemic different from other downturns. “There are times when you can say it’s good for almost anybody. And there are other times where you can say it’s bad for almost everybody,” he said. “This is obviously a very mixed bag. 

Another trend has been the rise of special purpose acquisition company transactions as an IPO alternative, according to Elofson. A SPAC is a type of shell company or “blank check” company that raises money through an IPO in order to acquire or merge with an existing company. According to IR Magazine, an investor relations trade publication, SPAC transactions in 2020 have already surpassed the number and amount raised in 2019, and some of the high-profile companies to go public through this route recently include electric truck maker Nikola and fantasy sports and betting platform DraftKings.

— Jessica Folker

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