These days it seems like only two kinds of companies are going public…
Biotechs and special purpose acquisition companies (SPACs).
Biotech companies of all types have been kept afloat during this coronavirus crisis thanks to sympathy plays from the ones specifically targeting vaccines.
SPACs, also known as blank check companies, conduct their IPOs to raise capital and pursue deals in specific areas. They have no commercial intent other than the sole purpose of acquiring another company that remains undisclosed.
SPACs are generally more insulated from market volatility because investors are essentially just depositing money into an account while management searches for a company to acquire.
This week one biotech company, Lyra Therapeutics (LYRA), is going public. Two blank check companies, Collective Growth Corp (CGROU) and Fortress Value Acquisition (FVAC), also debuted.
Today, I want to take a look at each of them and share what potential I think they have in the current market environment.
Collective Growth Corp (CGROU)
In this market, it takes one heck of a brave company to test the IPO scene. You’d almost think that for a company to IPO right now, they’d have to be high.
Well, Collective Growth Corp is high… or at least the clients of its intended company acquisition will be. Collective Growth Corp aspires to target businesses within the cannabinoid industry.
Specifically, they want to acquire a company that operates adjacent to the industry but isn’t directly involved in growing hemp.
But here’s the thing, folks…
As excited as I get about marijuana legalization and allowing people to pursue their rights to medicate themselves in a more natural way and get the relief they need, the whole industry is struggling right now. Pun intended — it’s currently “up in smoke.”
A recent cannabis IPO hopeful, Sundial Growers, is down nearly 95% since it’s initial public offering date. It started trading at $10.45 and it most recently closed at $0.57.
Even more concerning for Collective Growth Corp, only one of the seven cannabis special purpose acquisition companies that have held IPO since 2018 have actually made an acquisition.
That company was Akerna and it’s down 18% since it started trading at $10 per share the day it went public.
As for Collective Growth Corp, it also will also start trading at $10 per share.
I’m going to pass on it as a long-term hold for sure, but I may keep it in mind on my list of stock to short.
Fortress Value Acquisition (FVAC)
Fortress Investment Group is the company that will be sponsoring the IPO of FVAC. The group co-founded another SPAC called Mosaic Acquisition Corp. and recently combined with Vivint Smart Home (VVNT).
Fortress has loads of experience and very strong expertise in a wide array of investment strategies, including credit, private equity, and liquid markets.
The company has over 1,700 institutional clients and private investors worldwide.
Its primary business is to sponsor and manage a variety of investment funds, permanent capital vehicles, and related managed accounts.
Unlike Collective Growth Corp, Fortress Value Acquisition will have a much broader focus.
Nevertheless, the company says that it plans to seek out businesses that could “benefit from a hands-on owner with extensive investment and operational expertise.”
I find that reassuring, actually. Ownership and management is something that I take into strong consideration anytime I decide to buy shares of a company.
The company is led by Joshua Pack who is the chairman and also a managing partner of the credit funds business at Fortress. Andrew Knight will serve as the CEO and is also a managing partner at Fortress.
Both of these executives have prior SPAC experience, as they both served as directors of Mosaic corp.
Given the especially strong leadership experience of Fortress Value Acquisition, including their prior SPAC experience, I’m seeing some strong potential upside in the company.
The company has priced its shares at $10 apiece and is offering 30 million units.
Lyra Therapeutics (LYRA)
Lyra is an exciting new biotech IPO that has the mission to create precisely tuned medicines so patients can breathe freely.
Debilitating ear, nose, and throat diseases (ENT) restrict a person’s ability to breathe and millions of people are affected by them.
The company relies upon their years of expertise in the materials sciences and drug development and formulation to create its new proprietary technology platform.
This platform can precisely and consistently administer medicines directly to the affected tissues and a single dose is effective for sustained periods of time.
The company’s two primary products are LYR-210 and LYR-220.
They can be administered quickly and non-invasively during an in-office treatment and can deliver up to six months of continuous drug therapy.
The company offered 3.5 million shares at $16, the high end of its range.
BofA, Jefferies, William Blair, and BTIG are underwriters for the deal with this IPO.
Given the strong fundamentals that I’m seeing in Lyra, as well the strength of the biotech sector overall right now, I’m anticipating good things from this company and it will be on my radar of stock to trade.
Watch Me Put LYRA, CGROU, and FVAC Into Play
While I can’t guarantee I’ll be trading these specific names next week, one thing is for sure.
I’m putting on IPO trades every week for my exclusive subscribers to show them how to get a piece of the exciting IPO market.
The overall market may be volatile right now, but I’m putting out a watchlist each and every week to help folks learn to take profits on the IPOs showing great market divergence.