- SWORD-financing
SWORD-financing (Stock and Warrant Off-Balance Sheet Research & Development) is a special form of
financing invented to help youngbiotech companies access capital to finance theirR&D via establishing SPE (special purpose entity).Innovation is vital tobiotech firms. However,uncertainty of the commercial viability and regulatory approval of new products and technologies makesinnovation a very risky undertaking. Conventional internalfinancing of innovation is generally not possible because biotech firms tend to be small with meager profits and fewcash resources. SWORD financing is used to encourage innovation by diversifyingrisk across wide financial markets. SWORD provides investors an opportunity to identify and finance underfunded, yet attractive projects. An SPE acts as an intermediary between the parent company and the investors, separating the project from the existingliabilities of the parent company. To provide flexibility andliquidity for all the parties, an SPE issues special securities (units) and raises finance via public or private offerings. In essence, one unit is a portfolio consisting of one share of SPE’s equity, one warrant to purchase a share of the parent firms' common stock, and acall option for the parent firm to buy back shares of SPE.ee also
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Hybrid security
*Seniority (finance)
*Venture lending External links
* [http://www.investopedia.com/terms/s/sword.asp Investopedia.com]
* [http://www.highbeam.com/doc/1G1-14444761.html SWORD financing of innovation in the biotechnology industry]
* [http://www.fma.org/SLC/DSS/Theodossiou_doctoral.pdf Reasons for Financing R&D using the SWORD structure by Alexandra K. Theodossiou]
* [http://www.jstor.org/pss/3665868 Michael E. Solt. SWORD Financing of Innovation in the Biotechnology Industry]
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