Rachel, David —
I wanted to follow up on the conversations I had earlier today with Jonathan Pritchett and Sarah Langley-Kwan at Whitfield Barrow regarding roadshow feedback received through the first week. As you know, the roadshow commenced on January 29, and we are now approximately five days in. The news is very positive: Whitfield Barrow is recommending that we raise the estimated IPO price range based on strong investor demand and early oversubscription indications. The purpose of this email is to walk you both through the proposed range change, the filing mechanics required to effectuate it, and the action items and timeline for the coming days.
**1. Proposed Range Revision**
The current estimated price range, as set forth in the publicly filed S-1 (filed January 22, 2024, SEC File No. 333-276841), is $17.00 – $19.00 per share. Whitfield Barrow is recommending a revised range of $18.00 – $20.00 per share. This represents an increase of approximately 5.6% at the low end ($17.00 to $18.00) and approximately 5.3% at the high end ($19.00 to $20.00).
The feedback from Whitfield Barrow indicates that the book is building well across both institutional and crossover healthcare-focused accounts, with particular strength among long-only funds. At the revised range midpoint of $19.00, the implied post-IPO market capitalization would be approximately $1.9 billion (100,000,000 shares outstanding on a base-deal basis × $19.00 per share). At $20.00, the implied market capitalization would be approximately $2.0 billion on a base-deal basis, before giving effect to the overallotment option.
For clarity, the base offering size remains unchanged at 20,000,000 shares, all primary — no secondary sales. The overallotment option of 3,000,000 additional shares (15%) also remains unchanged.
**2. Required S-1/A Filing — Amendment No. 1**
To reflect the revised range, we will prepare Amendment No. 1 to the Registration Statement on Form S-1/A. The principal sections requiring updates are as follows:
- **Cover page price range** — revised from $17.00–$19.00 to $18.00–$20.00. - **Capitalization table** — reflecting revised estimated net proceeds at the new range midpoint and endpoints. - **Dilution section** — recalculated dilution figures based on the revised assumed IPO price. - **Use of proceeds** — we will review this section to determine whether any allocation references require adjustment in light of increased proceeds, though I expect the broad categories will remain consistent (revolving credit facility repayment of approximately $65 million drawn on the Keypoint National Bank facility, R&D investment, potential acquisitions, and general corporate purposes). - **Conforming changes** throughout the remainder of the prospectus as applicable.
In addition, we will need to coordinate with the following:
- **Kellerman & Associates** (Richard Olander / Sonia Melendez) — they will need to review the updated financial presentation to confirm that no comfort letter issues arise from the revised figures. - **Meridian Hale & Quivorn** (Graham Neville / Kathryn Brennan), as underwriters' counsel — they will review the amendment and may have comments.
**3. Filing Timeline**
We are targeting the filing of the S-1/A on **Monday, February 5, 2024**. To meet that target, here is what needs to happen over the next 48 hours:
- Eric Johannsen and Claire Dempsey on our team will prepare the revised drafts over the weekend and circulate an initial redline against the current S-1 by **Sunday evening, February 4**, for management review. - **David** — I would ask that your finance team confirm the revised capitalization and dilution tables by **close of business Sunday**. Eric will send you the framework with the assumptions so your team can validate the numbers. - Toppan Donnelley has been placed on standby for a Monday filing.
As a reminder, the roadshow is currently scheduled to conclude on **February 7, 2024**. Following the S-1/A filing, the next steps in sequence would be:
- Request for acceleration of effectiveness — targeting **February 7, 2024**. - Pricing — targeting **February 8, 2024**, subject to market conditions and the final state of the book.
**4. Underwriting Agreement Considerations**
I want to note that the range increase does not create any new issues on the Underwriting Agreement front. The current UA drafts already contemplate pricing flexibility — the agreement will be executed at the actual pricing, not at the filed range. Our ongoing negotiations with Meridian Hale on the UA are proceeding on track.
The underwriting discount remains at 6.0% of the public offering price, which at $20.00 per share would be $1.20 per share. This is consistent with what has been agreed with the full syndicate: Whitfield Barrow, Calloway Pierce Securities, Velthorn Capital Partners, and Pemberton Wallis.
**5. Board / Pricing Committee Matters**
As you will recall, the Board previously delegated pricing authority to the Pricing Committee. My view is that the existing resolutions are broad enough to authorize the Pricing Committee to set the final price within (or, as drafted, reasonably above) the revised range, and that no additional board action is required solely by reason of this range increase. That said, **Rachel**, I would appreciate your confirmation on this point after reviewing the resolutions. If for any reason the delegation language is narrower than I recall, we would want to address that promptly.
The Pricing Committee will convene on pricing night to formally authorize the final public offering price, the underwriting discount, and the execution of the Underwriting Agreement.
**6. Lock-Up Agreements**
I can confirm that all 45 lock-up agreements have been executed and delivered to Whitfield Barrow. Claire Dempsey confirmed receipt of the last outstanding signatures as of January 31, 2024, per the lock-up execution tracker she has been maintaining. The lock-up period runs 180 days from the date of the final prospectus. Assuming effectiveness and pricing on February 8, 2024, the lock-up expiration date would be August 6, 2024. The range change does not affect the lock-up terms in any respect.
**7. Coordination with Dr. Rourke and Ms. Tsujimoto**
I would suggest that you brief Dr. Nathaniel Rourke and Meg Tsujimoto on the proposed range increase at your earliest convenience. This is a positive signal about market reception of the Arbor Health story, and I think it is important for Nate and Meg to be aware of it — particularly as they continue the roadshow next week. I am happy to join a call with them if that would be helpful.
**8. Summary of Action Items**
To keep us on track for a Monday filing, here is a consolidated list of next steps:
1. **C&H** — Prepare and circulate redline of S-1/A by Sunday evening, February 4. 2. **David Halderman / AHT finance team** — Confirm updated capitalization table and dilution figures by Sunday COB. 3. **Rachel Moynihan** — Confirm that the Pricing Committee delegation authority covers pricing within the revised range. 4. **C&H** — Coordinate with Toppan Donnelley for Monday, February 5 EDGAR filing. 5. **C&H** — Notify Kellerman & Associates and Meridian Hale & Quivorn of the amendment and circulate for their review. 6. **All** — Working group call Monday morning. I would suggest **8:00 AM ET** to finalize the S-1/A before filing. Eric will circulate a dial-in.
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Rachel, David — this is a very encouraging development. Strong demand at this stage of the roadshow reflects well on the business and on the management team's presentation to investors. We still have work to do between now and pricing, but the trajectory is the right one.
I am available by phone and email over the weekend for any questions. Please do not hesitate to reach out.
Best regards,
Theodore Langston Partner Calderwood & Harkness LLP 125 Broad Street New York, NY 10004 (212) 558-3700 tlangston@calderwoodharkness.com