![]() It came about because lots of long-only funds wanted to participate at the IPO, and were happy just to take shares, Ms Marvin says. The first warrantless Spac was Therapeutics Acquisition Corp, underwritten by Jefferies and sponsored by RA Capital, floating last July and raising $118m. Companies, however, want the cleanest capital structure possible after IPO, and warrants create an overhang. Spac shares typically come with warrants, giving investors an opportunity to increase their holding in the future, and making an offering more attractive. Huge demand from healthcare investors enabled the biotech space to originate the warrantless Spac, which was a huge deal at the time, according to Ms Marvin. And if they invest at IPO they normally get a first look at any so can have a more meaningful investment in the operating company.” They are willing to give it a six-month shot. “But because have been announcing so much faster, it’s become easier for the long-only to invest. But the vehicle also became better known, and companies became more comfortable pulling the trigger, Ms Marvin says. Largely this was because the infrastructure around Spacs – the lawyers and bankers etc – became more established. In 2019 the average time from Spac IPO to merger announcement was 11.8 months. Also importantly, the whole process of IPO to merger became a lot quicker last year, attracting a bigger pool of investors, she says. Throw in rock-bottom interest rates, and parking cash in these vehicles has become appealing. But with cash flowing into the drug development sector, attracted in part by the Covid-19 spotlight, these vehicles are offering investors another way to access private companies.ĭemand is also growing because some investors now view Spacs as a cash-management tool, according to Kristi Marvin, the founder of Spacinsider.Ī Spac’s investors do not have to support the merger that is brought to them – they can ask for their money back instead. The explosion in Spacs is certainly not limited to biotech, and other sectors have seen much higher deal volumes. Only those backed by specialist biotech funds are likely to be interested in the niche world of drug development however, this is true for many of the groups captured in this analysis, which is based on data collected by Spacinsider. ![]() They can shop in any sector they chose – or more than one – and those detailed below have all stated an interest in healthcare. Spacs typically have 24 months to find a target. ![]() For this is ultimately a Spac’s main purpose: raise money via IPO and then find a merger partner, furnishing the chosen target with new funds and its own investors with a stake in the newly listed group. Since the boom started only a handful of Spacs have gone on to merge with a private drug developer, so it is probably too soon to judge the track record of these vehicles in terms of bringing high-quality young biopharma groups to the public markets. For young drug developers considering financing options this is clearly great news, though for investors backing these so-called blank-cheque companies the jury is still out. Another 11 IPO’d in January this year alone, and the amounts being raised are also surging. But with more special-purpose acquisition companies floating every week, competition for the hands of well-bred private companies is only getting fiercer.ģ6 Spacs floated in 2020 with a disclosed interest in the healthcare sector, according to Spacinsider, a company that tracks these vehicles. This year is about the consummation of deals. The start of the Spac boom was 2020’s story. The clock is ticking for the flood of blank-cheque companies that raised money last year, and competition is only getting hotter.
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