Hartford Business Journal

14 Hartford Business Journal | April 5, 2021 | HartfordBusiness.com By Matt Pilon mpilon@hartfordbusiness.com A unique and relatively rapid pathway for companies to raise capital and get listed on a public stock exchange has seen a national resurgence, and Connecticut is getting in on the action. In the past few months, three Connecticut-based private companies — all in the medical technology space — have announced merger deals with publicly-traded firms called "special purpose acquisition companies," which also go by the catchier acronym "SPAC" or the synonymous "blank-check" company. Initial public offerings by SPACs, which raise money from investors to go hunting for acquisition targets, have already surpassed their record 2020 totals, with 296 IPOs so far this year as of press time, totaling $95.8 billion in proceeds, according to SPACtrack.net, which counts more than 550 SPACs actively vetting targets. Locally, the largest SPAC deal by value involves genomics-testing provider Sema4, which has added hundreds of jobs at its Stamford and Branford facilities since 2018 with the help of a $6 million state loan. The other two SPAC mergers involve companies founded by Jonathan Rothberg, a pioneer in speedier DNA sequencing who is perhaps Connecticut's most prolific scientist-entrepreneur. His Butterfly Network makes a pocket-sized ultrasound machine, while Quantum-SI is developing a protein sequencing platform that promises to lead to better ways to diagnose and treat cancer and other diseases. The combined value of the three local deals is nearly $5 billion and the companies are all being acquired by New York-based SPACs. For the merged or acquired companies, experts say SPAC deals generally mean higher valuations, more certain pricing and access to greater amounts of capital, as well as a faster path to the market compared to a traditional initial public offering process (three to six months vs. one to two years). With hundreds of SPACs hunting for acquisition targets across the country, and securities laws only giving them a limited amount of time to spend their capital or risk giving it back to investors, experts say the situation is creating intense demand, driving up valuations and leading some earlier-stage companies to go public. Matt McCooe, CEO of quasi-public venture capital investor Connecticut Innovations, which holds stakes in both Quantum-SI and Sema4, said SPACs have been making overtures to a number of CI's venture portfolio companies. "There's so much capital out there, it's a feeding frenzy," McCooe said. "From our perspective, it's great for our portfolio companies because they're raising a lot of money at very rich valuations." As a public venture investor, CI also cares about economic impact. McCooe said SPACs, which are shell companies with no other operations, SPAC Attack CT companies get in on blank-check merger rush Matt McCooe is the CEO of Connecticut Innovations, the state's quasi-public venture investor that has several portfolio companies involved in mergers with special purpose acquisition companies, or SPACs. HBJ Photo | STEVE LASCHEVER

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