Owlet Baby Care, the maker of connected infant-monitoring products, announced its plans to merge with Special Purpose Acquisition Company (SPAC), Sandbridge Acquisition Corporation at a $1b valuation. A SPAC is a “blank check” shell corporation designed to take companies public without going through the traditional initial public offering process. Instead, the SPAC goes public as a shell company, then later acquires and merges with target companies to bring them public on the stock market, avoiding the regulatory hurdles of a traditional IPO.
Founder of Owlet, Kurt Workman, favored the SPAC option for its attractive shorter lock-up periods of shareholder stock post merger. The merger is valued at over $1 billion, and is trading on the New York Stock Exchange as “OWLT”. The deal marks one of the biggest valuations for a babytech company and puts a spotlight on technology & innovation in this sector. The $135 million infusion will accelerate Owlet’s expansive product pipeline, deepen penetration, and expand globally.
The growth of SPAC mergers in the sexual health & technology industry
Owlet is the latest in a growing number of femtech companies to enter the public markets via SPAC mergers. The sexual health and women’s health companies, PlayBoy and Hims & Hers, joined the SPAC bandwagon in Q4 of 2020.
Playboy signed a merger with SPAC Mountain Crest Acquisition Corp to return Playboy to the public markets on NASDAQ under “PLBY” at a valuation of $415m. In its press release, Playboy CEO Ben Kohn states “Mountain Crest is a truly unique SPAC in that it has no warrants outstanding, and only a tenth of a right per share, which creates a less complicated and less dilutive entity for our shareholders. The SPAC process is an innovative and efficient route to go public that provides us with the growth capital to continue to accelerate our commercial expansion.”
The benefits of SPACs for businesses considering alternatives to a traditional IPO
Hims & Hers, which launched in November 2017 as a men’s sexual health and hair loss company, added a women’s health division in recent years. The telemedicine startup followed Playboy that quarter, electing a reverse merger with SPAC Oaktree Capital Management, resulting in a valuation of roughly $1.6 billion. The CEO of Hims & Hers, Andrew Dudum, stated “We had always expected and prepped for a traditional IPO, but there are a lot of favorable dynamics in the new group of SPACs. There’s greater speed and certainty of a deal, which helps the team stay focused, and we get to partner with an amazing investor like Howard Marks [co-chairman of Oaktree].”
In 2021, over 500 SPACs were issued. The rise of SPACs creates a low friction viable avenue to exit for sexual health and women’s health startups and promotes VC returns.
Head over to our blog page to read more ASV Insights. Next time, we will look at the rise of M&A activity around femtech medical innovations.
