One Possible Strategy for an Acquisition is via a Special Purpose Acquisition Company (SPAC)
Authors: Joel Shertok, PhD, Board Member and Aviva Lev-Ari, PhD, RN, Founder, LPBI Group, 1.0 & 2.0
UPDATED ON 3/18/2021
That seems to be confirmed by a recent study by Michael Klausner and Emily Ruan of Stanford University and Michael Ohlrogge of New York University. The authors look at blank-cheque firms that made acquisitions between January 2019 and June 2020. They find that, in 25% of cases, the sponsor’s payout exceeded 12% of post-merger equity, compared with a median stake of 7.7%.
They also conclude that some spacs deliver far worse returns for investors than others: companies that went public through the spac route fell in value by an average of 3% after three months, 12% after six months and by a third after 12 months. They lagged behind the wider market and even further behind an index of firms that listed via ipo.
However, about half the sample is made up of “high-quality” spacs, defined as those run by former Fortune 500 bosses or set up by large private-equity firms. These perform much better, outperforming ipos and the wider market over six months (though not over 12).
SOURCES
https://www.economist.com/finance-and-economics/2021/02/16/why-spacs-are-wall-streets-latest-craze
The SPAC Bubble May Burst—and Not a Day Too Soon
A Sober Look at SPACs
57 Pages Posted: 16 Nov 2020 Last revised: 6 Mar 2021
Date Written: October 28, 2020
Abstract
A Special Purpose Acquisition Company (“SPAC”) is a publicly listed firm with a two-year lifespan during which it is expected to find a private company with which to merge and thereby bring public. SPACs have been touted as a cheaper way to go public than an IPO. This paper analyzes the structure of SPACs and the costs built into their structure. We find that costs built into the SPAC structure are subtle, opaque, and far higher than has been previously recognized. Although SPACs raise $10 per share from investors in their IPOs, by the time the median SPAC merges with a target, it holds just $6.67 in cash for each outstanding share. We find, first, that for a large majority of SPACs, post-merger share prices fall, and second, that these price drops are highly correlated with the extent of dilution, or cash shortfall, in a SPAC. This implies that SPAC investors are bearing the cost of the dilution built into the SPAC structure, and in effect subsidizing the companies they bring public. We question whether this is a sustainable situation. We nonetheless propose regulatory measures that would eliminate preferences SPACs enjoy and make them more transparent, and we suggest alternative means by which companies can go public that retain the benefits of SPACs without the costs.
Keywords: SPAC, Securities Law
Suggested Citation:
UPDATED on 3/17/2021
Paul R. Milgrom
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2020
Born: 20 April 1948, Detroit, MI, USA
Affiliation at the time of the award: Stanford University, Stanford, CA, USA
Prize motivation: “for improvements to auction theory and inventions of new auction formats.”
Prize share: 1/2
To cite this section
MLA style: Paul R. Milgrom – Facts – 2020. NobelPrize.org. Nobel Media AB 2021. Thu. 18 Mar 2021. <https://www.nobelprize.org/prizes/economics/2020/milgrom/facts/>
LECTURE by Paul R. Milgrom
https://www.nobelprize.org/prizes/economic-sciences/2020/milgrom/lecture/
To cite this section
MLA style: Robert B. Wilson – Interview. NobelPrize.org. Nobel Media AB 2021. Wed. 17 Mar 2021. <https://www.nobelprize.org/prizes/economic-sciences/2020/wilson/interview/>
Robert B. Wilson
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2020
Born: 16 May 1937, Geneva, NE, USA
Affiliation at the time of the award: Stanford University, Stanford, CA, USA
Prize motivation: “for improvements to auction theory and inventions of new auction formats.”
Prize share: 1/2
To cite this section
MLA style: Robert B. Wilson – Facts – 2020. NobelPrize.org. Nobel Media AB 2021. Thu. 18 Mar 2021. <https://www.nobelprize.org/prizes/economics/2020/wilson/facts/>
UPDATED on 2/5/2021
SPAC growth has multiplied faster than the COVID-19 virus contagion. In fact, the pandemic frightened many companies who were contemplating an IPO in 2020. A SPAC is a safer way to get to an IPO during market and economic hardships. Think of it as a merger behind closed doors rather than under the magnifying glass of the SEC, investors, creditors, etc. 70% of all money raised through public offerings in January 2021 were SPACs. Per the graph, 2020 saw $82B poured into SPACs. The single month of January 2021 saw more than 96 SPACs raise $20B. The US is now seeing 5 new SPACs a day!
UPDATED on 2/2/2021
Blank Check Companies’ Hunt For Innovative Medtech Start-Ups To Heat Up Further, Experts Predict
Healthcare SPAC Mergers – Overview
![Chart]()
| SCP & CO Healthcare |
01/22/2021 |
$200 |
1 common
plus 1/2 warrant
|
Health Care
Technology
|
SCP & CO
Sponsor, LLC
|
| Biotech Acquisition |
01/26/2021 |
$200 |
1 common
plus 1/2 warrant
|
Biotech |
SPRIM Global |
| FoxWayne |
01/20/2021 |
$50 |
1 common
plus one warrant
|
Biotech |
FoxWayne
Enterprises
Acquisition
Sponsor LLC
|
| Healthcare Capital |
01/15/2021 |
$240 |
1 common
plus 1/2 warrant
|
General
Health Care
|
Healthcare
Capital
Sponsor LLC
|
| Big Cypress |
01/12/2021 |
$100 |
1 common
plus 1/2 warrant
|
Biotech |
Big Cypress
Holdings LLC
|
| Athlon |
01/12/2021 |
$276 |
1 common
plus 1/2 warrant
|
Health
Wellness
|
AAC HoldCo, LLC |
| Locust Walk |
01/08/2021 |
$175 |
1 common
plus 1/3 warrant
|
Biotech |
Locust
Walk Partners
|
| KL |
01/08/2021 |
$288 |
1 common
plus 1/3 warrant
|
General
Health Care
|
Kennedy Lewis |
| Omega Alpha |
01/07/2021 |
$138 |
1 common |
Biotech |
Omega Funds |
| Healthcare Services |
12/23/2020 |
$331 |
1 common
plus 1/2 warrant
|
Healthcare
Services
|
Healthcare
Services
Acquisitions
Holdings LLC
|
| Viveon Health |
12/23/2020 |
$201 |
1 common plus
1 warrant (1/2)
plus 1 right
(1/20th)
|
Orthopedic/
Regenerative
Medicine
|
Viveon Sponsor |
| MedTech |
12/18/2020 |
$250 |
1 common plus
1/3 warrant
|
Medical
Technology
|
MedTech
Acquisition
Sponsor LLC
|
| Blue Water |
12/15/2020 |
$58 |
1 common plus
1 warrant
|
General
Health Care
|
Blue Water
Sponsor LLC
|
| Frazier Lifesciences |
12/09/2020 |
$138 |
1 common plus
1/3 warrant
|
Biotech |
Frazier
Healthcare
|
| HumanCo |
12/09/2020 |
$288 |
1 common plus
1/2 warrant
|
Health
Wellness
|
CAVU Venture
Partners
|
| LifeSci II |
11/20/2020 |
$80 |
1 common |
Biotech |
LifeSci Advisors |
| Jiya |
11/19/2020 |
$104 |
1 common |
Biotech |
Samsara
BioCapital
|
| Consonance-HFW |
11/19/2020 |
$80 |
1 common plus
1/3 warrant
|
Biotech |
Consonance
Capital
Management
|
| Population Health |
11/18/2020 |
$173 |
1 common plus
1/3 warrant
|
Biotech |
Population
Health
Investment
Holding, Inc.
|
| Health Assurance |
11/13/2020 |
$525 |
1 common plus
1/4 warrant
|
HealthCare
Technology
|
Health
Assurance
Economy
Foundation
|
| Edoc |
11/10/2020 |
$90 |
1 common plus
1 warrant (1/2)
plus 1 right
|
HealthCare
Services
|
American
Physicians LLC
|
| Lux Health Tech |
10/27/2020 |
$345 |
1 common plus
1/3 warrant
|
HealthCare
Technology
|
Lux Ventures |
| Eucrates |
10/23/2020 |
$105 |
1 common plus
1/3 warrant
|
Biotech |
Vedanta
Management
|
| BCLS |
10/22/2020 |
$144 |
1 common |
Biotech |
Bain Capital
Life Sciences
|
| Sarissa |
10/21/2020 |
$200 |
1 common plus
1/3 warrant
|
Biotech |
Sarissa
Capital
Management
|
| Helix |
10/20/2020 |
$115 |
1 common |
Biotech |
Cormorant
Asset
Management,
LP
|
| Turmeric |
10/16/2020 |
$98 |
1 common plus
1/3 warrant
|
Biotech |
MPM Capital |
| Petra |
10/08/2020 |
$73 |
1 common plus 1 warrant |
Biotech |
Petra Investment
Holdings, LLC
|
| Montes Archimedes |
10/07/2020 |
$411 |
1 common plus
1/2 warrant
|
General
HealthCare
|
Patient Square
Capital LLC
|
| Alpha Healthcare |
09/18/2020 |
$100 |
1 common plus
1/2 warrant
|
Biotech |
AHAC Sponsor
LLC
|
| HighCape |
09/04/2020 |
$115 |
1 common plus
1/3 warrant
|
Biotech |
HighCape |
| BCTG |
09/03/2020 |
$167 |
1 common |
Biotech |
Boxer Capital
(Tavistock)
|
| CM Life Sciences |
09/02/2020 |
$443 |
1 common plus
1/3 warrant
|
Biotech |
Casdin Capital/
Corvex
Management
|
| Arya Sciences III |
08/07/2020 |
$150 |
1 common |
Biotech |
Perceptive
Advisors
|
| Health Sciences II |
08/04/2020 |
$160 |
1 common |
Biotech |
RTW
Investments
|
| Therapeutics |
07/08/2020 |
$136 |
1 common |
Biotech |
RA Capital |
| Chardan Healthcare 2 |
04/24/2020 |
$86 |
1 common plus
1 warrant (1/2)
|
Biotech |
Chardan |
| DFP Healthcare |
03/11/2020 |
$230 |
1 common plus
1/4 warrant
|
General
HealthCare
|
Deerfield
Management
|
| Amplitude Healthcare |
11/22/2019 |
$100 |
1 common plus
1/2 warrant
|
HealthCare Technology/
HealthCare Services
|
Metalmark
Capital,
Avego
Healthcare Capital
|
| Total |
40 SPACS |
$7,242 |
|
|
|
Source: Chardan, FactSet, CapIQ, latest close as of 01/25/2021
Joseph Hernandez, founder and CEO of Blue Water Acquisition Corp., a SPAC that is currently looking for an acquisition target in the health care space, also expects a lot more deal flow in medtech, particularly in artificial intelligence, telemedicine, cardiology, joint replacements, diagnostics and genomics.
JOSEPH HERNANDEZ, FOUNDER AND CEO, Blue Water Acquisition Corp.
“Medtechs are often undervalued in the market, but I think if you look at their risk profile, they are usually less risky than biotech companies because you usually have a product,” Hernandez told Medtech Insight.
Blue Water Acquisition announced on 15 December it raised $50m by offering 5 million units at $10. Each unit consists of one share of common stock and one warrant exercisable at $11.50. The underwriter, Maxime Group, exercised its over-allotment option, resulting in $57.5m raised.
“We have been a free-trading company for a little bit over 30 days and I can tell you we’ve seen a large number of deals – in excess of 40 deals we’ve looked at [at] this point – and continue to get deal flow here on a daily basis,” Hernandez said. Though he feels that the smaller size of the SPAC, which puts it at an acquisition target range of roughly $75-$240m, puts it in the “sweet spot.”
“There’s not a lot of players in this acquisition spectrum,” he said. The majority of deals have been on the larger side, where there are more SPACs competing for the same private companies.
Karim Anani, EY Americas Transactions Accounting Advisory Leader and EY Capital Markets Partner advising companies on strategic transactions, also expects the SPACs craze to continue ramping up in 2021.
“We’re also starting to see increased deal sizes, so the valuations and the size of the companies that SPACs are looking to merge with in the medtech space are increasing as we progress through 2020 and go into 2021,” Anani told Medtech Insight. “The amount of capital, if you consider general SPACs and what is identified for this industry, is probably $10-$14bn – it just depends how you want to cut the data.”
SPACs Bubble?
Goldman Sachs Group Inc. CEO David Solomon, among others, have expressed concerns about the sustainability of SPACs. Solomon warned in the company’s call in January that the flurry of SPACs is not sustainable in the medium-term. Goldman Sachs is among the banks benefitting from the boom.
Grossman also foresees that there will be “slowing of the pace,” noting that there are about 250 SPACs out there.
“Once it gets to 300 or 400, it starts to get crowded in each of the different spaces and there’s only a limited number of opportunities for public-ready companies,” he said. Nevertheless, he believes that 2021 will be an interesting year.
“I think you’re going to see a lot of innovative companies go public, especially in medtech.”
SOURCE
https://medtech.pharmaintelligence.informa.com/MT143415/Blank-Check-Companies-Hunt-For-Innovative-Medtech-StartUps-To-Heat-Up-Further-Experts-Predict?vid=Pharma&processId=bbaaf314-e3b9-4ed1-8631-b85f7773183b
1/20/2021
Overview of Leaders in Pharmaceutical Business Intelligence (LPBI)
ACQUISITION STRATEGIES AND INVESTMENT NEEDS
LPBI was founded by Dr Aviva Lev-Ari, RN, PhD in 2012 and developed since then to Present.
During the period 2012-2020 – LPBI developed a vast Intellectual Property portfolio of several IP Assets (LPBI 1.0):
- 2MM e-Readers,
- 6000 Journal articles,
- 18 e-Books in Medicine,
- 100 e-Proceedings & Tweet Collections and
- 5000 Biological images
Starting in 2021, LPBI will evolve into a new entity building on LPBI 1.0 IP Portfolio, designated LPBI 2.0:
See below links for more information.
LPBI 2.0 is pursuing:
- Medical Text Analysis NLP, ML-AI on our content created 2012-2020
- Content Monetization on Blockchain: existing digital products, and ML products
LPBI is seeking potential acquirers in both Israel and the United States, as LPBI 2.0 requires both an acquirer and investor/investment to realize its strategies. This will involve the transfer of ownership of an IP Portfolio consisting of over 3.3 Gigabytes of cloud-based English text and associated biological images.
The projected acquisition will also entail new management of the IP Portfolio consisting of both 1 and 2 strategies, above, along with a team of ten Experts in Medicine and Life Sciences.
We feel that realizing these activities will require either:
- An existing company able to execute an M&A strategy, or
- An investor/acquirer to convert LPBI to a new ownership, assuming control of the IP and the LPBI Team.
Investment will be necessary to support these strategies:
A. The conversion of our content via Natural Language Processing (NLP) and Machine Learning (ML) /Artificial Intelligence (AI) into the corresponding graphics along with its interpretation by experts.
- Scaling up to all contents of LPBI 1.0 IP Portfolio: Journal articles, books, e-Proceedings, Biological Images
B. The implementation of the Blockchain Transaction Network, necessary for secure monetization of LPBI existing content:
- Journal articles, books, e-Proceedings, Biological Images
- New products generated by NLP (hyper-graphs and expert interpretation),
- B2C – a Digital Store in a Healthcare Digital Marketplace, and
- B2B – installations in Big Pharma and Healthcare Insurers involve implementation of the customized design of a Blockchain transaction IT infrastructure:
These include IT design, which represents the first ever combined IT infrastructure for NLP and Blockchain transaction network:
- Recommendation Engine,
- Smart Contracts,
- Permissions,
- Immutable ledger
C. Addition operations requiring investment:
- Original data migration from an Authoring cloud to a Transaction cloud.
- Hosting a Digital Store in an existing Healthcare Digital Marketplace for B2C
- B2B special installations and development of consultancy services
- Content promotion campaigns
One possible strategy for an acquisition is via a Special Purpose Acquisition Company (SPAC)
- Discussion of this strategy: Date TBD
Additional Background Sources:
LPBI 1.0:
https://pharmaceuticalintelligence.com/2019-vista/
LPBI 2.0:
https://pharmaceuticalintelligence.com/vision/
Projections
https://pharmaceuticalintelligence.com/vision/pharmaceuticalintelligence-com-journal-projecting-the-annual-rate-of-article-views/
Portfolio of 10 Intellectual Property Asset Classes
https://pharmaceuticalintelligence.com/2019-vista/
Six Strategies, 2021-2025
https://pharmaceuticalintelligence.com/vision/
The Opportunities Map
https://pharmaceuticalintelligence.com/2019-vista/opportunities-map-in-the-acquisition-arena/
The Team
https://pharmaceuticalintelligence.com/knowledge-portals-system-kps/
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