Hartford Business Journal

HARTFORDBUSINESS.COM | SEPTEMBER 16, 2024 13 Serial scientist-entrepreneur Jonathan Rothberg founded three companies that have gone public through SPAC IPOs. HBJ PHOTO | STEVE LASCHEVER Sagging Stocks Following the SPAC IPO frenzy of 2020-21, some CT companies struggle to find their footing That deal did not go well for Theraplant, as Greenrose later ran into financial difficulties in Arizona. Theraplant eventually filed for bank- ruptcy protection and its ownership was transferred to its lender, Dela- ware-based DXR Finance HoldCo, last year. Hirsch said many SPACs run into financial problems. "There's just an economics problem with a public company anyway, because it's so expensive to be one," he said. "There's a lot of compliance, there's a lot of regulatory oversight, there are a lot of accounting fees. And the bigger you are, the smaller those line items are on a relative basis, so you can absorb it easier." "By and large," he added, "when you have a SPAC, you should be buying a company that is successful. Then you're bringing it to market to put money into it from the capital markets and continue that growth. And it seems like just most of these (deals) didn't happen that way." Products with weight Connecticut SPAC IPOs from 2020-21 included Sema4, the genomics-testing provider that later renamed itself GeneDx; Butterfly Network, which makes a pocket-sized ultrasound machine; Quantum-Si, which developed a protein-se- quencing platform used to diagnose and treat cancer and other diseases; and Hyperfine, which makes an inex- pensive, portable MRI system. While GeneDx's stock price is trading in the low $30-per-share range, it is down more than 90% since the company went public in 2021. GeneDx laid off hundreds of workers and closed its Connecticut lab operations in 2022 and 2023, and changed its name from Sema4 in January 2023. The other three companies were all founded by Jonathan Rothberg, a scientist, Yale professor and pioneer in speedier DNA sequencing who is perhaps Connecticut's most prolific scientist-entrepreneur. His three SPAC IPO companies — Butterfly Network, Quantum-Si and Hyperfine — all have seen their stocks struggle in the three years since going public. Butterfly Network, which is traded on the New York Stock Exchange, has fared the best, yet its stock in early September was down about 83% from its debut, trading recently around $1.66 per share. Quantum-Si's stock, traded on the Nasdaq exchange, recently was hovering around 91 cents per share, down more than 90%, while Hyperfine's stock, also traded on the Nasdaq, was trading around 89 cents per share, down nearly 91%. None of that, however, discourages Rothberg, who says that while the stocks aren't performing well, the companies are producing results. "So, I think you have to go back to (Ben) Graham, who was (Warren) Buffett's mentor," Rothberg said. "In the short term, the stock market is a voting machine, and it's voted By David Krechevsky davidk@hartfordbusiness.com T he years 2020 and 2021 will forever be remembered for the COVID-19 pandemic, but investors will recall them for a different reason: How much they lost on investing in SPAC IPOs. So-called Special Purpose Acqui- sition Companies — also known as "blank-check companies" — are created to conduct an initial public offering that raises capital for acquiring or merging with another company. Prior to 2020 and 2021, SPAC IPOs were generally limited in number, but they exploded in those two years to levels not seen before nor since. Unfortunately for investors, and some of the businesses involved, the results haven't been great so far. Companies that went public through SPAC IPOs during the pandemic had lost more than $100 billion in market value as of May, according to the Wall Street Journal. Connecticut experienced its own SPAC IPO frenzy in 2021, with at least four companies going public. Combined, they raised more than $5.1 billion from investors. Since then, their stock prices have strug- gled, with three posting a more than 90% decline, while the fourth has fallen more than 80%. To protect investors, the U.S. Securities and Exchange Commission in January adopted new rules to more tightly regulate SPACs. What the future holds, though, for the Connecticut companies that did them remains an open question. Boom and bust According to spacanalytics.com, from 2003 through 2019, there were never more than 66 SPAC IPOs in one year, with their combined proceeds never exceeding $13.6 billion. In fact, over that 17-year span, the average number of SPAC IPOs per year was 23, while the average combined proceeds totaled just under $4.1 billion. Then came 2020 and 2021. In 2020, there were 248 SPAC IPOs, representing 55% of the 450 total IPOs in the U.S. By comparison, the percentage of SPAC IPOs vs. all IPOs had never been higher than 36% in the previous 17 years. The SPAC IPOs in 2020 had combined total proceeds of $83.4 billion, spacanalytics.com said. In 2021, the number of SPAC IPOs spiked to 613, or 63% of total IPOs, with combined proceeds of $162.5 billion. And then, as suddenly as the SPAC boom arrived, it dissipated just as quickly. There were only 86 SPAC IPOs in 2022, and 31 last year. "In my view, the SPAC market is pretty much kind of over; that wave kind of crested out of vogue," said David Hirsch, a partner with law firm Hinckley Allen, which has an office in Hartford. Hirsch provided legal counsel to Watertown-based Theraplant when it and three other marijuana producers were acquired by the New York-based SPAC Greenrose Acquisition Corp. in 2021. 600 500 400 300 200 100 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 SPAC IPOS BY YEAR SPAC IPOs Note: Through Sept. 6, there have been 31 SPAC IPOs in 2024. | Source: www.spacanalytics.com

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