The Daily Dish (6/03/21)
Chamath Palihapitiya filed for 4 new SPAC S-1s in the aftermarket today, this time in conjunction with Kishen Mehta of Suvretta. Chamath’s other 6 SPACs were done in partnership with Hedosophia. Social Capital Suvretta I-IV, have all filed to raise $200M and will specifically target biotechnology.
In splitting with his previous SPACs, these all have no warrants… breaking from a trend of friendlier investor terms. Each of the four mention a sub-sector of particular focus: DNAA: Neurology, DNAB: Oncology, DNAC: “Organ space”, DNAD: Immunology Granted they still have to build a book and ultimately price, but his most recent SPAC, SOFI, has been trading very well in its early de-SPAC Days, up ~11% over the last 5 days and trading at $23..
Digital banking firm SoFi Technologies recently completed its SPAC merger with Social Capital Hedosophia Corp. SoFi is now officially a public company trading on the Nasdaq under the symbol “SOFI.”
Wall Street cheered the news, and sent SOFI stock up more than 10% on the day.
SoFi is a fintech company that is building an all-in-one digital wallet which has been labelled as the potential ‘Amazon of Finance’.
SoFi was created based on the idea of leveraging automated technologies and a digitally-native experience to create a hyper-convenient access to cheap student loan refinancing.
Over the past decade, students across America have flocked to refinance their loans through SoFi to take advantage of the lower rates.
The new challenges for SPACs result in part from the abundance of the deals that raised money early in 2021.
Many companies in recent months have said that several different SPACs have asked them about mergers, a trend that contributed to the frenzy in the sector.
The pressure to execute deals at realistic valuations could get even more intense in the months ahead because nearly 260 blank-check companies with about $87 billion on hand face merger deadlines in the first three months of 2023.
While such deadlines can be extended, they can pressure SPAC teams that often need several months to finish deals and now face turbulent market conditions.
If no deal is done by the final date-after any extensions-the SPAC creators have to return money to investors and lose what they put in up front to create the shell companies, typically several million dollars for underwriting fees and other expenses.
Those incentives explain why many blank-check mergers will still get done in the months ahead-even if they are completed at lower valuations or the SPAC teams have to give away some of the discounted shares to complete the deals.