Responsibility of the failed Nanodynamics IPO points to underwriter

Despite a reasoned a conclusion that the failure of Nanodynamicsâ'' $100-million IPO on the Dubai exchange put forth on this blog may have been the result of poor underlying economics for the company, it appears that the fault may have instead been with the underwriter.

In an investigative piece by Alan Shalleck of Nanoclarity for Nanotech-Now, it is deduced that the lead underwriter, Global Crown Capital Ltd. (GCC), failed to put the underwriting funds into the issuerâ''s account, namely Nanodynamics, and this breach of the rules forced Nanodynamics to voluntarily de-list the stock and return the money to those who had purchased the stock.

It seems interest in the company was thereâ''all the shares were pre-sold, but according to the rules of IPOs the underwriter has to first buy all the shares and then sell them. According to the Shalleck piece, the problem was that GCC just never put the $50 million for purchasing the shares into Nanodynamicsâ'' accounts.

If this is indeed the case, as Shalleck points out, caveat emptor to nanotech startups. Make sure you have a good underwriter.

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