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Shamrock began trading on January 8.
Image courtesy of Nasdaq |, Inc.
When it goes public as a company’s primary goal, the most important factor is not the way to do it.
Consider Clover Health Investments, which delivers Medicare Advantage health plans to 57,000 members. The six-year-old campaign began the process of going public in the summer, preparing for two scenarios: a traditional original public offering and a merger with a blank check company, according to a spokesperson.
In October, Clover was far down the road with a traditional IPO and had made several films with the Securities and Exchange Commission, according to Andrew Toy, Clover’s co-founder, president, and chief technology officer. The insurtech chose to mix with
Social capital hedosophia
Holdings Corp. III, a special purpose construction company backed by venture capitalist Chamath Palihapitiya, in a $ 3.7 billion merger. Clover Health (ticker: CLOV) began trading on January 8th.
The main reason for joining this special SPAC was Palihapitiya, formerly
Facebook
(FB) action. Palihapitiya has used blank check companies to buy several companies. His first SPAC, Social Capital Hedosophia, merged with Virgin Galactic (SPCE) in 2019. His second, Social Capital Hedosophia II (IPOB), agreed a $ 4.8 billion merger with start-up business Opendoor -September. Palihapitiya’s fifth SPAC, Hedosophia Capital Holdings V, won SoFi earlier this month in a $ 8.65 billion deal.
“He’s a good investor,” Toy said.
Clover Health considered the various routes to public tender. Each method had advantages and disadvantages – traditional IPO, direct listing, or SPAC – he said. “As an option in my life,” Toy said.
Traditional IPOs are a well-defined way to go public, but they can cause trouble if a company tries to list when the stock market is falling. Roadside demonstrations for traditional IPOs are not a good fit for younger companies as they do not offer much time, usually an hour, for management teams to introduce themselves to analysts, officials said shamrock. Many beginners don’t have years of historical financial information, they said.
Direct listings – where existing shares are sold without the help of subscribers – were created because companies were dissatisfied with traditional IPO priorities, Toy said.
Listing has not usually just allowed companies to bring capital into the balance sheet, he said. (The SEC agreed in December to change the NYSE rule that handles the issue, allowing companies to use direct floor listings to raise capital.)
“SPACs take something between you and you have a commercial company,” Toy said.
One of the main advantages of blank check companies is that they provide proof of what investors buy into a company, as well as how much capital will be raised, he said. Toy.
For example, Clover Health’s merger with Hedosophia Holdings Corp. III delivered $ 1.2 billion in total cash to the insurtech. This included a $ 400 million public investment in private equity, or PIPE, from investors such as Fidelity Management & Research Co., Jennison, Sen. Investment Group LP, Casdin, and Visual Advisors.
If Clover Health had stayed with the traditional IPO, the company would have been under market conditions two weeks prior to the offer, said Clover Health CEO and co-founder Vivek Garipalli. That means that the amount of capital raised would have depended in part on a general sense of the economy.
The subscribers would have chosen the investors the night before Clover went public, Garipalli said. In the sale to Social Capital Hedosophia Holdings Corp III, Clover Health selected its PIPE investors the night before it announced the deal, a spokesman said.
In addition to the $ 400 million PIPE, Clover received up to $ 828 million of cash held in the hedosophia Holdings Corp. Social Capital trust account. III. This money, which was expected to be invested in whatever company with the SPAC combined, came from Social Capital III IPO in April.
SPACs typically use S-4 control filing when going public, while traditional IPOs use S-1. The disclosure requirements are the same, Garipalli said, so Clover Health was able to take the information it provided for the S-1 and put it into the S-4.
Shamrock was able to add more information about the forecast, including projections, in the S-4 than it was permissible to include in the S-1, he said, ‘talk more about the industry. “It allowed us to have more open conversations. Prestigious institutions have the potential to lead good leadership, ”said Garipalli.
Write to Luisa Beltran at [email protected]