Shares of 23andMe (ME) rose 21% to close at $13.32 apiece in their trading debut on the Nasdaq as the consumer genetic testing company became one of the latest companies to go public via SPAC deal.
The public debut comes after 23andMe and the special purpose acquisition company (SPAC) VG Acquisition Corp. announced a merger in February. The deal valued 23andMe’s outstanding shares of capital stock at $3.5 billion. The vast majority of shareholders of VG Acquisition Corp., which was founded by Virgin Galactic’s Richard Branson, voted in favor of the merger agreement in a meeting June 10, and the deal closed on Wednesday.
Sunnyvale, Calif.-based 23andMe said it planned to use capital garnered from the transaction toward additional investments to grow its consumer health and therapeutics operations. The company makes virtually all of its revenue from its consumer research and services business, which includes sales of its flagship direct-to-consumer ancestry and genetic testing kits.
The company saw growth slow down in its most recent full fiscal year, however, and posted revenue of $305.5 million during the fiscal year ended March 31, 2020, for a drop of 31% compared to the $440.9 million delivered over the same period ending in March 2019. Revenue was $155.3 million for the nine months ended December 31, 2020. As of late January, the company had 83,400 subscribers to 23andMe+, a subscription service the company launched last October to provide members with additional genetic testing reports.
And like many newly public companies, 23andMe continues to post losses. Net losses totaled $250.9 million during the year ended March 31, 2020, widening compared to losses of $183.5 million a year earlier. The company added in a filing it “expects to continue to incur significant expenses and operating losses for the foreseeable future” as it expands its therapeutic research and development and builds out its products and services.
“I’ve always run this company not necessarily expecting that we were going to be a public company, and that was certainly never the goal,” Anne Wojcicki, CEO of 23andMe, told Yahoo Finance Live on Thursday. “The goal’s always been really about, what’s the impact to the customer, the end person? And how do you really make personalized medicine and personalized healthcare a reality?”
“It’s a phenomenal day. I love actually being able to be a public company because we do have a strong consumer brand and it’s really about engaging our customers more and more,” she added.
23andMe joins a bevy of other companies opting to go public via a merger with a blank-check company, or vehicle that raises funds to acquire and then bring a private company public. Other companies including electric-vehicle maker Nikola (NKLA), space exploration firm Virgin Galactic (SPCE) and personal finance company Sofi Technologies (SOFI) each went public via SPAC. For private companies, a SPAC deal can expedite a go-public timeline and help circumvent many of the fees associated with working with investment banks in a traditional initial public offering.
The SPAC merger rose in prominence in 2020, with 248 issuances raising a total of $83.4 billion last year, according to SPAC Research data. So far in 2021, 343 deals have raised a $107.3 billion, setting a new annual record in the first half of the year alone.
However, many of these deals took place in the first quarter of 2021, with issuances slowing after March following increased regulatory scrutiny and potential accounting changes for SPAC warrants from the U.S. Securities and Exchanged Commission. Others, including famed billionaire investor Warren Buffett, have issued harsh criticisms of SPACs, in part for their tendency to take speculative companies public.
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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