Biotech embraces the blank check
For investors looking to get in on the boom in biotech IPOs, picking a target company means poring over SEC filings, digging through scientific papers, and enduring paragraph after paragraph of risk statements. But an increasing number of biotech stock pickers are offering to take investors’ money and do the work for them, launching financial vehicles that exist only to take private companies public.
Called special purpose acquisition companies, or SPACs, these blank-check entities have existed for years on Wall Street but are fairly new to biotech. Essentially, a name-brand fund forms a SPAC, invites investors to buy into it through an IPO, and then later chooses a company with which to merge, creating a publicly traded firm by reverse-engineering.
Biotech’s first SPAC came last year, courtesy of the bank Chardan, followed by one from Perceptive Advisors. Last week, biotech investor EcoR1 Capital pulled off a $125 million IPO for a SPAC of its own, and this week RA Capital is expecting to raise at least $100 million for a similar effort. Whether the micro-trend continues will likely depend on just how well their SPAC targets perform in the long term.
Called special purpose acquisition companies, or SPACs, these blank-check entities have existed for years on Wall Street but are fairly new to biotech. Essentially, a name-brand fund forms a SPAC, invites investors to buy into it through an IPO, and then later chooses a company with which to merge, creating a publicly traded firm by reverse-engineering.
Biotech’s first SPAC came last year, courtesy of the bank Chardan, followed by one from Perceptive Advisors. Last week, biotech investor EcoR1 Capital pulled off a $125 million IPO for a SPAC of its own, and this week RA Capital is expecting to raise at least $100 million for a similar effort. Whether the micro-trend continues will likely depend on just how well their SPAC targets perform in the long term.
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