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23andMe to merge with VG Acquisition Corp. to become publicly-traded company

mediacenter.23andme.com

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Re: 23andMe to merge with VG Acquisition Corp. to become publicly-traded company

#31

Post by thedudeabides5 »

lordnacho wrote: post #26
detaro wrote: post #21

Earlier quoted context omitted.

In addition to speed and guaranteed price a SPAC merger also has less reporting requirements, because the SPAC already did go trough the IPO paperwork when it was created. And didn't have to explain weird things about the business to investors because it had no history or things to be going on. It then can relatively easily buy 23andMe, and 23andMe doesn't have to explain its business risks etc to the public as much…

Am I the only one who thinks that's a massive hole in the rules? You IPO an empty shell, which passes easily because it does nothing, and then any old shop with a messy business can then be bought by it?

Yes, that's pretty much the idea.

Back in markets, we would of called it 'regulatory arbitrage.'

Re: 23andMe to merge with VG Acquisition Corp. to become publicly-traded company

#32

Post by [deleted] »

engineer_22 wrote: post #10

Why would a company go through a SPAC instead of an IPO? Does the SPAC merger constitute a hedge against uncertainty in an IPO? What I mean is, 23andMe gets cash NOW and the SPAC gets the company at a discount but accepts the risk the IPO might not meet its goals? Could someone please explain the strategy?

[deleted]

Re: 23andMe to merge with VG Acquisition Corp. to become publicly-traded company

#33

Post by brentm »

engineer_22 wrote: post #10

Why would a company go through a SPAC instead of an IPO? Does the SPAC merger constitute a hedge against uncertainty in an IPO? What I mean is, 23andMe gets cash NOW and the SPAC gets the company at a discount but accepts the risk the IPO might not meet its goals? Could someone please explain the strategy?

One factor is predictability in initial price. The SPAC & company negotiate a fixed price to go public. With an IPO the company begins the process with a valuation in mind but a lot of it still comes down to the roadshow investors, for better or worse.

Re: 23andMe to merge with VG Acquisition Corp. to become publicly-traded company

#34

Post by macinjosh »

lordnacho wrote: post #26
detaro wrote: post #21

Earlier quoted context omitted.

In addition to speed and guaranteed price a SPAC merger also has less reporting requirements, because the SPAC already did go trough the IPO paperwork when it was created. And didn't have to explain weird things about the business to investors because it had no history or things to be going on. It then can relatively easily buy 23andMe, and 23andMe doesn't have to explain its business risks etc to the public as much…

Am I the only one who thinks that's a massive hole in the rules? You IPO an empty shell, which passes easily because it does nothing, and then any old shop with a messy business can then be bought by it?

No you're not the only one, it is a massive loophole that benefits corporations and the perfect example of why government regulation can never really work in the end. There will always be a way around found.

Re: 23andMe to merge with VG Acquisition Corp. to become publicly-traded company

#35

Post by ffggvv »

engineer_22 wrote: post #10

Why would a company go through a SPAC instead of an IPO? Does the SPAC merger constitute a hedge against uncertainty in an IPO? What I mean is, 23andMe gets cash NOW and the SPAC gets the company at a discount but accepts the risk the IPO might not meet its goals? Could someone please explain the strategy?

it’s because it doesn’t have the same regulation or due diligence. you can scam retail investors.

Re: 23andMe to merge with VG Acquisition Corp. to become publicly-traded company

#36

Post by lordnacho »

thedudeabides5 wrote: post #31
lordnacho wrote: post #26

Earlier quoted context omitted.

Am I the only one who thinks that's a massive hole in the rules? You IPO an empty shell, which passes easily because it does nothing, and then any old shop with a messy business can then be bought by it?

Yes, that's pretty much the idea. Back in markets, we would of called it 'regulatory arbitrage.'

Why doesn't every IPO happen this way? Once you want to go public, you make a SPAC, get that approved, then have it buy your business?

Re: 23andMe to merge with VG Acquisition Corp. to become publicly-traded company

#38

Post by tachyonbeam »

lordnacho wrote: post #26
detaro wrote: post #21

Earlier quoted context omitted.

In addition to speed and guaranteed price a SPAC merger also has less reporting requirements, because the SPAC already did go trough the IPO paperwork when it was created. And didn't have to explain weird things about the business to investors because it had no history or things to be going on. It then can relatively easily buy 23andMe, and 23andMe doesn't have to explain its business risks etc to the public as much…

Am I the only one who thinks that's a massive hole in the rules? You IPO an empty shell, which passes easily because it does nothing, and then any old shop with a messy business can then be bought by it?

On top of this, SPACs usually have private PIPE investors who get shares at the "IPO" price, typically 10 dollars, while people who buy the public SPAC shares typically have to pay twice that, which feels super scammy.

https://www.investopedia.com/terms/p/pipe.asp

Re: 23andMe to merge with VG Acquisition Corp. to become publicly-traded company

#39

Post by casefields »

lordnacho wrote: post #26
detaro wrote: post #21

Earlier quoted context omitted.

In addition to speed and guaranteed price a SPAC merger also has less reporting requirements, because the SPAC already did go trough the IPO paperwork when it was created. And didn't have to explain weird things about the business to investors because it had no history or things to be going on. It then can relatively easily buy 23andMe, and 23andMe doesn't have to explain its business risks etc to the public as much…

Am I the only one who thinks that's a massive hole in the rules? You IPO an empty shell, which passes easily because it does nothing, and then any old shop with a messy business can then be bought by it?

Check out The China Hustle for a great documentary on this topic: https://www.rottentomatoes.com/m/the_china_hustle

It's currently streaming on Hulu and Amazon Prime Video.

Re: 23andMe to merge with VG Acquisition Corp. to become publicly-traded company

#40

Post by ericmay »

lordnacho wrote: post #26
detaro wrote: post #21

Earlier quoted context omitted.

In addition to speed and guaranteed price a SPAC merger also has less reporting requirements, because the SPAC already did go trough the IPO paperwork when it was created. And didn't have to explain weird things about the business to investors because it had no history or things to be going on. It then can relatively easily buy 23andMe, and 23andMe doesn't have to explain its business risks etc to the public as much…

Am I the only one who thinks that's a massive hole in the rules? You IPO an empty shell, which passes easily because it does nothing, and then any old shop with a messy business can then be bought by it?

I wouldn't consider it a hole in the rules, it's more of an alternative listing method.

In my view, nothing materially changes. If 23andMe is a turd then an IPO through Goldman or JPMorgan isn't going to really change that, and neither will an SPAC.

Although it's a little bit "gambling" because you don't know what the SPAC acquisition will be ahead of time, I think the SPAC vehicle is great for retail investors. If you take IPOE and SoFi for example, you could have bought Social Capital Hedosophia's IPOE SPAC at $13/share or something and watched it grow once the shares were slated to be turned into SoFi shares. But in the traditional IPO process, well, you get to buy the SoFi shares at the IPO price. If you have a high net worth, that's probably fine. But if you're a retail investor - well, look at AirBnB's IPO price at $68/share and what you could actually get it at on IPO which was closer to $140 or something.

In other words, you get a little bit of exposure to the game, and of course a little bit of exposure to the risk as well which is "I don't know who they will merge with".

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