What happens when the clock starts ticking on SPACs?
The latest trend in biotech finance is the blank-check company, a publicly traded entity that exists only to find promising private firms and take them public through an IPO-free reverse merger. More than 10 health care-focused blank-check outfits have gone public in 2020 with more waiting in the wings.
But the most recent entrant, a $500 million shell company formed by Patient Square Capital, offers a reminder of the risks involved. Like the vast majority of special purpose acquisition companies, or SPACs, Patient Square’s blank check has just 24 months to find a buyout target and get SEC approval for the merger. If time runs out, it has to return investors’ money and wind the whole thing down.
That may seem like plenty of time to ferret out a promising target, but it’s worth remembering that today’s private biotech firm has a wealth of options for going public, between a vibrant IPO market, stalled companies that can be fodder for reverse mergers, and ever more SPACs. Then there’s issue of market congestion: With so many biotech SPACs going public within weeks of one another, each with a 2022 expiration date, investors might be forced into less-than-attractive deal terms just to beat the clock.
But the most recent entrant, a $500 million shell company formed by Patient Square Capital, offers a reminder of the risks involved. Like the vast majority of special purpose acquisition companies, or SPACs, Patient Square’s blank check has just 24 months to find a buyout target and get SEC approval for the merger. If time runs out, it has to return investors’ money and wind the whole thing down.
That may seem like plenty of time to ferret out a promising target, but it’s worth remembering that today’s private biotech firm has a wealth of options for going public, between a vibrant IPO market, stalled companies that can be fodder for reverse mergers, and ever more SPACs. Then there’s issue of market congestion: With so many biotech SPACs going public within weeks of one another, each with a 2022 expiration date, investors might be forced into less-than-attractive deal terms just to beat the clock.
.png)
No hay comentarios:
Publicar un comentario