The Penny Drop

Welcome to The Rundown! Each week we'll identify and break down for you SPACs that are capturing market share and making an impact.

Happy Sunday, Friends! 

The last week of SPACs was packed with market activity including deals, IPOs, and Lawsuits. The SPAC bubble burst has led to the market being flooded with penny stocks. Also, a serial sponsor upsizes its IPO for its next SPAC, a SPAC is taking a drug development firm public, and a medical testing firm comes under scrutiny due to mounting losses and lawsuits from customers. Read on to find out the latest about all things SPACs. 


SPAC Bubble Burst Triggers a Surge in Penny Stocks

  • Following the burst of the SPAC bubble, over 550 U.S. stocks have dropped below $1 a share, a significant increase from less than twelve early in 2021 amidst a downturn in the market for fast-growing startups.

Many of these underperforming stocks debuted during the IPO and SPAC deal surge in 2020 and 2021.

Nasdaq rules mandate that companies maintain their share price above $1.00 to remain listed, giving firms falling below this threshold 180 days to comply. 

Due to the large number of stocks trading below $1, about one in six Nasdaq-listed companies is violating the exchange's listing criteria. Other reasons for noncompliance include not meeting minimum requirements for market float, stockholders' equity, or shareholder count.

This has resulted in a spike in reverse stock splits, where companies reduce their number of shares to increase the share price, with 255 occurring in 2023 compared to 159 in the previous year.

$HLXB Upsizes Initial Public Offering to $150 Million

  • Helix Acquisition II announced in an updated that it plans to increase its IPO offering to 15 million shares from the originally registered 10 million last month.

The SPAC is backed by life sciences-focused investment firm Cormorant, which has assets under management of over $2 Billion.

Cormorant is interested in purchasing 2.5 million shares and may also invest $35 million in a private placement when the SPAC completes a merger. Helix Acquisition II is headed by Bihua Chen, who is the CEO and Chair of Cormorant Asset Management. 

The SPAC aims to invest in the healthcare sector, especially in biotechnology. It intends to list on the Nasdaq under the ticker “HLXB”. Leerink Partners is acting as the sole book runner on the deal.

Cormorant's previous SPAC, Helix Acquisition closed a merger with biotech firm MoonLake Immunotherapeutics. MoonLake's stock has surged by 453% since its merger closed with the stock. 

SPAC Deals Announced 

$GLLI is Merging With Drug Developer Alps Global in $1.6 Billion Deal

  • SPAC Globalink Investment has agreed to merge with Malaysian Drug Development firm Alps Global Holding Berhad in a deal valuing the firm at an enterprise value of $1.6 billion. 

Founded in 2017, Alps specializes in personalized medicine through genomics DNA, mRNA, and cellular therapy. The company has grown into a comprehensive platform that combines biotech research with medical and wellness services to offer personalized, precise, and preventive healthcare.

The deal includes an earn-out provision of up to 48 million shares if certain revenue milestones are met over five years -merger. 

The merger is anticipated to close sometime in the second quarter of this year, post which the combined company will list on the Nasdaq Stock exchange under the name “Alps Life Science Inc”.

Globalink raised $100 million through its December 2021 Initial Public Offering, targeting technology companies in e-commerce and payments across North America, Europe, South East Asia, and Asia, excluding , Hong Kong, and Macau.

De-SPAC News

$ME Stock Continues to Fall Amidst Lawsuits and Losses 

  • Three years ago, DNA testing firm 23andMe was valued at nearly $6 billion, but the company now faces the risk of being delisted from the Nasdaq.

Since the company's debut, its shares have declined by 95%, valuing the firm at $345 million, most of which can be attributed to the company's financial troubles.

23andMe saw a 20% drop in revenue to $111 million and an increase in operating losses to $188 million in six months of 2023. The company's cash reserves have also decreased by a third to $256 million between March and September last year. 

CEO Anne Wojcicki has attempted to reduce 23andMe's financial losses by cutting jobs, selling parts of the business, and focusing on subscription services and expanded healthcare offerings. However, the company had only 640,000 subscribers by last March, which was less than half its target.

The drug developer has recently faced challenges in attracting investors for new projects like drug development and is also facing increasing litigation due to a data breach that compromised the health data of 7 million customers. 

Court Dismisses Class Action Lawsuit Against Battery Maker $ENVX

  • A federal court ruled that Enovix investors failed to convincingly claim the company lied about its equipment tests, dismissing their accusations of securities fraud

Judge Susan Illston of the US District Court for the District of Northern California stated that the shareholders did not demonstrate the required intent. However, Enovix investors have the option to submit a revised complaint. 

Enovix went public by merging with SPAC Rodgers Silicon Valley Acquisition in July 2021, in a deal valuing the combined company at $1.13 billion.

Numerous companies that have gone public through SPAC deals in 2020 and 2021 have been sued by disgruntled investors. 

Meme of the Day

Are You Ready for The Party????

The Headlines 

Marcum Expands SPAC and IPO Practice in Asia with New Hong Kong Office

Class Action SPAC Lawsuits Against SPACs Surge in 2024

Hedge Fund Zama Tries to Scuttle Merger Settlement Between Okada Manilla and $ADER

$ARVL's Spectacular Fall Continues With a Delisting From Nasdaq

$PEPL Reconsiders Liquidation 

Source: The Penny Drop