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Observations #15
A set of ideas and observations from a week’s worth of work analyzing businesses and technologies.
SPACs and new ways of going public in life sciences
Forma Therapeutics (FMTX) just went public this Friday using a different pathway designed by RA Capital called Series I. In short, insiders buy up most of the offering with $2M open to outsiders. Essentially, the process gives up liquidity for price control — one could call it, a public insider round. Investors can get a markup with “liquidity” and companies get access to public markets for financing rounds down the line.
In combination with this, biotech hedge funds have been raising special purpose acquisition companies (SPAC) to take companies public instead of using a standard IPO process. RA Capital, Perceptive, RTW Investments, EcoR1, Deerfield, and a few others have raised SPACs of their own. SPACs issue public shares to raise a pool of capital to buy a company. SPACs are pretty controversial tools — they are…
