Amid the recent gyrations in the equity markets, special purpose acquisition companies, better known as SPACs, have continued to gain favor, particularly among retail investors flush with savings. And in the middle of this frenzy is the health care sector.
Also known as blank-check companies, SPACs essentially flip the traditional initial public offering on its head, by first creating the shell company and then searching for an acquisition within a certain time frame, which is typically two years. Whatever skepticism SPACs once attracted, they have shaken it off. Since 2019, 199 SPACs have raised $86.9 billion, according to Bloomberg.
And health care companies have benefited. Of the 199 SPACs, 31 have stated they are focused on health care. Those SPACs have raised a collective $7.4 billion, with 25% of that total, or $1.8 billion, coming in January alone.
There is little mystery over why investors are so interested. The American health care sector will soon represent 20% of the country’s gross domestic product and is on the verge of significant change. Long-term frustrations around patient experience, digital health and surprise billing, among other concerns, have boiled to the surface amid the global COVID-19 pandemic, spurring a wave of innovation and investment.
While it’s unlikely that 2021 will see a double-digit increase in health care SPAC fundraising, it is a safe bet that continued enthusiasm from retail investors to participate in health care’s transformation, along with accommodative fiscal and monetary policy, will continue to drive interest in health care SPACs.
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