Abstract
The Covid-19 pandemic has accelerated some structural changes in the healthcare industry, and several health-tech start-ups thrived by providing innovative solutions to the challenges imposed by the pandemic. To finance their growth, many of these companies went through mergers with Special Purpose Acquisition Companies (SPACs). The paper investigates the market performance of healthcare-focused US-listed SPACs. The study aims to analyze the returns that healthcare SPACs offer to their investors and ascertain the determinants that drive these returns over a sample of 33 SPACs that merged with a healthcare firm between 2018 and 2021. Linear regression is employed to identify the drivers of SPACs’ market performance. Portfolio analysis is also performed and compared against the Russell 2000 and the S&P500 Healthcare Indexes.The first outcome accomplished by the analysis is that a portfolio made of healthcare-SPACs underperforms small-cap firms by 2.14% and the healthcare industry by 6.72% over a two-year period, even if the difference in the returns of the healthcare SPACs portfolio and the two benchmarks is not statistically significant. Moreover, a high level of redemptions, the presence of serial SPAC sponsors, cross-border deals, private equity and venture capital funds as sellers, and a high percentage of boutique investment banks among the sell-side advisors seem to negatively affect the returns of healthcare-focused SPACs with a significance level of at least 10%. Instead, a larger number of buy-side advisors appears to be beneficial for healthcare-focused SPACs’ market performance.
Highlights
During 2020, capital markets worldwide were characterized by high volatility and instability due to the outbreak of the Covid-19 pandemic
The objective of the study was to analyze the market performance of Special Purpose Acquisition Companies (SPACs) that completed a business combination with healthcare companies to understand whether SPACs could represent a sustainable source of financing for innovative healthcare companies, or they are destined to disappear because they do not provide compelling returns to shareholders
This paper compared the returns of a portfolio of healthcare SPACs against small-cap firms and healthcare companies and investigated the factors affecting the market performance of healthcare-focused SPACs
Summary
During 2020, capital markets worldwide were characterized by high volatility and instability due to the outbreak of the Covid-19 pandemic. The disruption and great uncertainty of financial markets made it more difficult to find the right “IPO window” for private firms aiming to become public companies to raise capital and finance their expansion. In response to this challenge, market operators, mainly in the United States, brush up a backdoor way to access public markets: the Special Purpose Acquisition Companies (SPACs). To keep growing these companies need to access public markets capital and scale up.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
