Rodman & Renshaw (NASDAQ:RODM) was optimistic about its public offering, expecting to issue 12 million shares at a price range of $5 to $7. But reality intervened, and the company ultimately sold only 8 million shares at $5 a pop on Tuesday. Worse yet, the stock quickly dropped to $4.20 as investors got jittery.

R&R helps biotech companies raise capital through private placements and other sophisticated transactions. It's a big market, with 1,100 private and 330 publicly traded companies in the space. And with the average drug requiring $1.2 billion to reach the market, biotechs often feed at Wall Street's trough.

For the most part, R&R has done quite well, capitalizing on the market opportunity. For the first six months of 2007, revenue spiked 75% to $47.2 million. The company even posted a profit of $10 million. So why is Wall Street lukewarm on R&R's public offering?

First of all, R&R gets an average 75% of its revenue from life sciences, which can be a volatile sector. If a few deals slip away, the growth rate could dampen considerably.

At the same time, R&R must compete with rivals such as Bank of America Securities (NYSE:BAC), Cowen & Company (NASDAQ:COWN), Jeffries & Company (NYSE:JEF), Lazard (NYSE:LAZ), and Thomas Weisel Partners (NASDAQ:TWPG).

No doubt, R&R realizes it needs to diversify its business, which should be easier with the boost from the public offering. However, it's not an easy transition to make, and is yet another thing for Wall Street to worry about.

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