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Does The SPAC Have A Future In Biopharma?

Special Purpose Acquisition Companies Can Speed Up Going Public, But There Are Risks

 
• By Chloe Kent

Special purpose acquisition companies can bring biopharma firms to market faster than a traditional initial public offering, but frequent failures and increased scrutiny from the US Securities and Exchange Commission mean their heyday in the life sciences space is arguably over.    

Speed lights
• Source: Shutterstock

For biopharmaceutical companies looking to go public, merging with a special purpose acquisition company can be an appealing alternative to the ‘traditional’ initial public offering process. Rather than teaming up with an underwriter to start selling its shares on a public exchange for the first time, a firm can merge with a publicly listed shell company – the SPAC. But following the SPAC boom of 2020 and 2021, when dozens of SPACs launched and began their search for a partner, the bubble seems to have finally burst.

SPACs launch IPOs to raise money which they hold in trust until they find another entity to merge with, a process known as a de-SPAC. The company which has merged with the SPAC then uses its cash to fund its operations and takes over its stock market listing, going public while bypassing the rigmarole of a traditional IPO

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