SPACs: A new trend
Freelance writer Barbara Nasto reports:
During the Monday morning session "Winning Without an IPO," among the strategies discussed for circumventing an IPO was the progressive and increasing trend of Special Purpose Acquisition Company (SPAC) deals. SPACs are publicly traded shell companies that go public with the intention of merging with or acquiring a company. With the decrease in the average number of dollars spent on life science IPOs since 2002, SPACs are taking their place among M&As, partnering and other alternative revenue streams.
To highlight their ascent, Stephen Davis, a shareholder at Heller Ehrman and the chairman of the session, cited a Wall Street Journal report from April 23, 2007 describing the increases in SPAC dealmaking. During 2005, 30 SPACs went public raising $2.1 billion, and in 2006 the number of deals increased by a third to 40 SPACs raising $3.4 billion. First quarter figures for 2007 indicate a record number of 17 deals to date.
During the session, Timothy Keating, president of Keating Investments, commented on the downside of SPACs, which he describes as an arbitration between private value and public price. The deal must fall below the public market level to be attractive to the buyer.
