The four Seattle companies that went public during the SPAC boom sputtered amid the broader economic downturn.
Porch, Nautilus Biotechnology, Rover and Leafly have all gone public in the past two years through a dedicated acquisition company. But these companies, which vary widely in their respective sectors, have seen their share prices fall by at least 50% from all-time highs.
So-called SPACs are companies created with the intention of acquiring a private company in order to make it public. Many venture capitalists and hedge fund managers embraced this investment vehicle as a way to earn relatively fast returns and take advantage of low interest rates.
The Seattle companies were among a large cohort of companies that took investor euphoria toward SPACs from late 2020 to 2021. Nearly 60% of all listings were through a SPAC merger last year.
However, with interest rates rising due to inflation, the SPAC market quickly began to slow down. Investor confidence is eroding, said Cameron Stanfill, a venture analyst at PitchBook. He added that investors are concerned that SPACs have underperformed significantly compared to the S&P 500.
A list of companies that went public through SPAC lost more than double the decline of the S&P 500 in 2022, according to CNBC.
There is also a steady stream of proposed merger plans being scrapped prematurely, with a total of 19 deals canceled so far this year. SeatGeek and Forbes are notable examples. Some companies looking for a company to acquire liquidated their capital and returned it to shareholders before ever making a deal.
Stanfill said these factors combined are why he predicts SPAC activity will slow seriously well into next year.
(Use the interactive chart below to track the stock prices of the four companies since they went public.)
Despite this, some companies have remained optimistic about SPACs. Cascadia Capital, a Seattle investment bank, for example, raised $150 million for a SPAC deal last year and recently said it still plans to acquire a company in the robotics or AI industry.
According to SPAC research, there are nearly 600 SPACs looking for a takeover target this year.
Many SPACs are growth companies, often with some form of technical component. These companies typically have little to no income when they go public, using some form of forward-looking projections as the basis for their valuation multiple. Interest rates are factored into valuation equations, and the higher they go, the lower the valuations for these companies. Because of this, many investors have avoided growth stocks, instead parking their capital in safer bets, Stanfill said.
The four Seattle companies below provide a picture of how the broader market is dealing with these types of companies.
The stock performance: Porch, a Seattle-based home-service platform, closed trading on Monday at $2.73, down nearly 90% from a previous high of $25.66 in mid-November.
The SPAC deal: The company went to Nasdaq in late December 2020. It merged with PropTech Acquisition Corp., a publicly traded SPAC, along with a private investment from Wellington Management Company, under the symbol PRCH. The merger was announced in late July 2020, with a valuation at the time of $523 million.
Current Market Cap: About $270 million
The stock performance: Nautilus Biotechnology, a Seattle-based company developing a new way to analyze the proteome, closed trading on Monday at $2.77, nearly 73% lower than a previous high of $10.10 in July.
The SPAC deal: The company went to Nasdaq in June 2021. It merged with Arya Sciences Acquisition Corp. III, a publicly traded SPAC sponsored by Perceptive Advisors, with the symbol NAUT. The merger was announced in February 2021, with a valuation at the time of $1.3 billion.
Current Market Cap: About $341 million
The stock performance: Rover, a Seattle-based online pet care platform, closed trading near an all-time low on Monday, with shares at $3.83. The company is down nearly 74% from a previous high closing price of $14.68 in late September.
The SPAC deal: The company went public on the Nasdaq in early August. It merged with Nebula Caravel Acquisition Corp, a SPAC sponsored by True Wind Capital, using the ticker symbol ROVR. The merger was announced in February 2021, with a valuation at the time of $1.35 billion.
Current Market Cap: About $697 million
The stock performance: Leafly, a Seattle-based online cannabis marketplace, closed Monday trading at $4.87 a share, more than 57% lower than a previous high of $11.34 in early May.
The SPAC deal: The company went public on the Nasdaq in early February. It merged with Merida Merger Corp., a SPAC sponsored by Merida Capital Holdings., using the ticker symbol LFLY. The merger was announced in August, valued at $385 million at the time.
Current Market Cap: About $209 million