Editor’s note: This article was updated on Jan. 18 to correct plans for the merger proceeds and the timeline for the closing of the merger.
Chamath Palihapitiya’s Social Capital Suvretta Holdings III (NASDAQ:DNAC) announced this morning it is merging with medical technology company ProKidney in a $2.6 billion deal. This move seems to have investors excited, with DNAC stock up slightly in morning trading.
Once the deal closes, the combined company will be worth more than $2.6 billion in equity. This size makes the DNAC merger one of the largest in 2022. Plus, Palihapitiya’s backing alone is sure to draw eyeballs to the ProKidney merger news.
That is because investors have been anxiously awaiting deals for several other SPACs that Palihapitiya leads. His Social Capital Hedosophia VI (NYSE:IPOF) and Social Capital Hedosophia IV (NYSE:IPOD) have yet to announce targets. Followers have gone so far as to track movements of his private jet in hopes of finding answers.
What Happened With DNAC Stock
So what else do you need to know about DNAC stock and the ProKidney merger?
The deal to bring ProKidney public includes a $575 million private investment in public equity (PIPE) transaction. This sum includes $125 million from Social Capital, as well as $50 million from existing ProKidney investors.
But what is ProKidney? And why should DNAC stock investors care?
ProKidney is working to develop tech that can treat chronic kidney disease through using patients’ own cells to restore kidney function. Pablo Legoretta, CEO of Royalty Pharma (NASDAQ:RPRX), is one of the founding investors. ProKidney plans to use proceeds from the SPAC merger to develop its lead candidate.
Why It Matters
SPAC deals dominated last year. In 2021, the value of SPAC deals globally exceeded $500 billion. However, the market for reverse mergers has since cooled, and many SPACs that have come to market have underperformed. The deal to take ProKidney public looks to reignite interest in such deals.
Investors should know that DNAC is also part of a larger trend. Palihapitiya, after launching a series of Social Capital Hedosophia SPACs, partnered with Suvretta Capital. Together, they have already launched four blank-check companies that raised $250 million each. Unlike the tech-focused Social Capital Hedosophia SPACs, the Social Capital Suvretta companies are looking at different biotech industries. These industries are neurology, oncology, organs and immunology.
For investors, the question is now: Can the ProKidney deal get Palihapitiya back on track after his company has struggled to find new partners in recent months?
What’s Next for DNAC and ProKidney
According to the press release, the deal will close some time in the third quarter. In the meantime, news of the deal has DNAC stock up about 1% today to $9.87 on an otherwise down day for markets. Over the near term, the ProKidney merger could help keep DNAC shares trending higher.
Investors may also be interested in investing in ProKidney long term thanks to its novel approach to managing kidney disease.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.