Silk Road Medical is executing a new IPO, in which it expects to sell shares at $15-$17. With 28.7 million shares, debt of $44 million and cash of $92 million, the total enterprise value may be equal to more than $400 million. If the shares commence to trade at $16, Silk Road Medical may be trading at more than 4x-5x forward sales, which does not seem justifiable.
While the company reports double digit revenue growth and a market opportunity of more than $2.6 billion, analysts don’t seem to have checked the company’s debt and the interest rate being paid. It is equal to more than 10% rate. In addition, other competitors like LeMaitre Vascular or InspireMD are not trading at such expensive valuations.
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Disclosure: We hold no position in Silk Road Medical either long or short and we have not been compensated for this article.