I noticed they went public via SPAC, which, as an investor, screams red flag and scares me.
Can anyone shed light on why they would go this route? Is it accurate to say best case is because they wanted less hassle / quicker to market and worst case is that their financials/books are a disaster and they didn’t want anyone looking too closely before the founders raised money and cashed out?
Genuinely curious and would appreciate any insightful replies
Most of the answers here are wrong. The real reason is that when companies go public through a regular IPO, they can't show projected financials, only actual results.
Ginkgo has poor results so far, but huge projections, which a fair number of people believe. So, SPAC.
I don't really understand SPACs. Is there a good article explaining what they do and why you take them instead of going public directly. And what happens to those SPAC shares now if you bought some?
Plenty of material on SPACs online, but per your question, the shares of the spac (SRNG) convert to the target (DNA). If you had units (SRNGU), you also got 1 share (DNA) + 1/5 warrant (DNA.W) per unit.
Yeah, absolutely. Especially when in comparison with current IPOs. Their listings end up being "take the publicly stated IPO price, pick a random multiple between 1x and 3x, and that's what we'll actually drop onto the market at some unknown period of time during the day". Of course some people aren't happy about the SPAC structure - how else would they make their money?
What exactly is a "hard tech" company? And is this a recent change? Tech companies have been going public without issues for years until the last ~24 months when SPACs exploded (and mostly churn out negative returns after the initial pop [1])
Isn't a standard IPO also great for a tech company with future revenues as long as you believe in your business and future prospect?
Really trying to wrap my head around why a company would do this, and also why this isn't a huge red flag as well
It's not "hard tech" per se. Rather it's companies that are (essentially) pre-revenue and/or pre-product.
E.g. Ginko did $100m in rev in 2021 and is at a 20B market cap.
Why would a company do this? Simple: Money. Spac sponsors "guarantee" a ~20B market cap. Investment bankers in a regular IPO might offer $4-5B (still 50x sales).
So what's the difference? Spac sponsors are willing to take "venture" style risk, and traditional IPO underwriters are not.
Another way to think about this is:
Traditional IPO underwrites are fairly risk adverse. They will value "high risk" companies in certain ways. E.g. How would you value a self driving company with 0 revenue? For bankers? pretty conservatively.
However the "market" has people that can and will value these companies more than IPO underwriters. Spac sponsors are essentially glorified "venture" style investments, that also happen to take the company public (and take a fairly large cut in return).
An alternative might be to have a "direct listing" without underwriters, however companies are unable to raise funds in a direct listing.
Umm. Spac management can "sell out" and gets coupons to buy stock so.. Does the SEC require the target company or the acquisition company file something akin to an S1 filing for the target company or ?
They are a great company and could have gone traditional IPO. However, with going SPAC they were able to bring 2 billion dollars into a company with super high valuation. They make less than 50mil and we’re valued at 18 to 20 billion. So don’t buy in now, you will have plenty of chance to buy this great company
Edit: Also just to add on by bringing in that 2 Billion dollars they have essentially secured the future of the company for a long time
> If you invest in a SPAC at the IPO stage, you are relying on the management team that formed the SPAC, often referred to as the sponsor(s), as the SPAC looks to acquire or combine with an operating company. That acquisition or combination is known as the initial business combination. A SPAC may identify in its IPO prospectus a specific industry or business that it will target as it seeks to combine with an operating company, but it is not obligated to pursue a target in the identified industry.
It's not bad per se, it's just how it works. Like pretty much everything in life the outcome is dependent on the people involved. You're not getting the potential for more upside without the introduction of more risk.
Chamath is currently leading four biotech SPACS: DNAA, DNAB, DNAC and DNAD, each with a stated target, neurology, oncology, organs & immunology. Anyone looking to invest in the SPAC today should consider the likelihood of this happening, the potential targets, and the sponsors history.
Or you can wait for an announcement around a proposed merger, even up to the day the official stock starts being traded.
Again, just depends on risk tolerance. It's nice to least have the option to take part in these deals.
SPACs are a great way to not have to hemorrhage IPO money to wall street bank cartels, and to lose billions w/ undervalued IPOs. I'm not sure what you're on about.
Can anyone shed light on why they would go this route? Is it accurate to say best case is because they wanted less hassle / quicker to market and worst case is that their financials/books are a disaster and they didn’t want anyone looking too closely before the founders raised money and cashed out?
Genuinely curious and would appreciate any insightful replies