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SPAC Mergers Take Biopharmas Public, But Valuations Often Sag Post-Closing

Deals Give Stock Market Access Without IPO

 
• By Mandy Jackson

Merging with a special purpose acquisition corporation is a viable funding tool, but it may not be the best choice for drug developers far from key milestones.

Money bag with the word SPAC - Special purpose acquisition company
SPAC mergers can be lucrative but it can be difficult to maintain and increase valuations afterwards • Source: Alamy/Andrii Yalanskyi

Mergers with special purpose acquisition corporations (SPACs) have become lucrative financial transactions for biopharmaceutical firms because they can raise significant capital and become publicly traded companies in a single transaction, bypassing the traditional initial public offering path. But without near-term milestone achievements or a high-profile management team, many drug developers that have gone public since the start of 2020 have not traded well in the US stock market to date.

SPACs, otherwise known as blank check companies, launch IPOs to raise money that they hold in trust until they merge with another entity. The target company uses the SPAC’s cash to fund its ongoing operations and takes over the blank check firm’s stock market listing

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