Special purpose acquisition companies, or SPACs, have arguably been the single biggest trend on Wall Street. Termed as “the backwards IPO,” SPACs are a way for promising enterprises to go public without all the paperwork of a traditional initial public offering.
In a traditional IPO, companies usually announce their intentions to go public and provide details to investors regarding their business operations. SPACs flip the script with investors pooling in their resources in a company with no specific business plan. They subsequently look for a potential target that intends to go public and merge together.
Therefore, companies can avoid all the hassle associated with a conventional IPO, bag a truckload of cash, and get a stock ticker.
Last year was hugely successful for SPACs as they raised approximately $80 billion in gross proceeds. The results comfortably surpassed the 2019 total of $13.6 billion. It appears that the trend is here to stay, as several SPAC-related mergers have already taken place this year.
Let’s look at three of the most recent and interesting SPACs so far.
Top SPACs to Know: Gemini Therapeutics (GMTX)
Biotech Gemini Therapeutics got listed after its merger with shell company FS Development Corporation. The SPAC is backed by Foresite Capital, which is a reputable venture capital firm. The offer comprises $121 million from the SPAC and an additional $95 million from public investment in private equity (PIPE).
GMTX stock fell roughly 8% on its first day, but its CEO feels that it offers excellent long-term prospects for investors.
The company is working on drugs that could potentially treat dry and wet age-related macular degeneration. Additionally, it is also developing a gene therapy that could treat macular trophy. Moreover, the company recently received fast-track status from the Food and Drug Administration for one of its drugs.
Currently, Gemini has enough money to fund its studies through 2023, which is sufficient time to get some of its products up and running.
Kentucky-based agtech company AppHarvest completed its merger this month with shell company Novus Capital Corporation. The deal values AppHarvest at roughly $475 million, providing the company with $435 million in cash equivalents. The company operates high-tech indoor farms that provide chemical pesticide-free fruits and vegetables using 90% less water than a traditional farm. APPH stock soared 44% on its first day of trading earlier this month.
AppHarvest’s management has laid down their aggressive expansion plan for the company. The company plans to operate a dozen greenhouses within the next four years. Moreover, it aims to bring a healthy $21 million in revenues from 60 acres of its farmland this year.
ESG-conscious consumers continue to grow in numbers, so the “eat clean” trend will be a significant growth driver for AppHarvest in the future.
Hims & Hers Health (HIMS)
Telehealth startup Hims & Hers Health is connecting subscribers to licensed health care professionals and offers third-party and in-house produced health care products. It recently completed its merger with blank check company Oaktree Capital Management Howard Marks in a deal worth $280 million.
The company has witnessed a massive spike in demand, with a 67% increase in revenues from the $83 million it made in 2019. Moreover, roughly 90% of this revenue is recurring. Its profit margin increased by 71% year-over-year, though it is still not profitable.
As we advance, Hims’ aims to provide a more holistic solution to its subscribers, including insurance, exclusive branded products, and increasing the perks and benefits of its membership.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.