Once thought of as fraudulent blank check companies used for money schemes, Special Purpose Acquisition Companies (SPACs) have come a long way; undergoing several rounds of scrutiny and regulation to become respectable in modern day Mergers and Acquisitions. 

They became especially popular in 2020 as interest rates fell and stock market volatility rose. SPACs during this era were commonly led by sponsors with long, trustworthy investment histories which helped them gain shareholder trust. Additionally, regular investors had a difficult time assessing business prospects or future earnings with the uncertain environment of the COVID-19 pandemic; sponsors mitigated some of that risk by acting as intermediaries.

Who Uses SPACs and Why?

SPAC use peaked in 2021, raising $95 billion in the first quarter alone. A $12 billion increase from the year before. It was a great option in an uncertain time, many investors thought that with the volatility of the market, SPACs were a comparatively better option. 

Slowly, as the economy recovered and stabilized, SPAC use started to shrink again, however they remained somewhat common tools for early stage biotech companies. These firms typically lack revenue, operate at a loss, and depend on clinical trial outcomes that may take years to materialize.

Using a SPAC offers such firms three compelling advantages: valuation certainty, speed to capital, and use of long-term forecasts. Valuations are locked in through private negotiation with sponsors; which provides certainty that traditional IPOs lack, due to the difficulty of pricing incomplete or unproven biotechnology. Furthermore, for the typical biotech firm, it takes between one and two years to land new funding for each series round. This way, the timeframe is closer to three months. Lastly, traditional IPOs value firms in their present condition, which is detrimental to a biotech company whose value lies almost entirely in the future. Through a SPAC, sponsors do their own valuations which weigh in future promises and expectations. This helps increase overall value and, therefore, capital raised for these typically capital intensive firms. 

SL Bio: Needs and Fundamentals

SL Bio is a Taiwanese company specializing in developing cellular and gene therapies. They focus primarily on regenerative medicine and oncology treatments, researching T-cells and non-human resources such as plant and bovine milk. 

These therapies are currently in preclinical trials, showing promising results, however their goals lie beyond a few drugs; SL Bio plans to scale cell therapy into a global industry. They are combining industrial logic with cell therapy in a way no one has before. 

The implementation of this goal is risky; cell therapy industrialization is limited by lack of standardization, limited manufacturing capacity, and high costs.  These are difficult challenges to overcome and ones that others have failed at before, but not impossible and becoming ever more attainable with current improvements in the technological era. Especially with the rise of AI in modern industries, SL Bio’s chances are higher than ever before. 

With this expected growth in mind, their merger with Horizon Space Acquisition II is valued at around $5.7 billion with public shareholders being able to cash out at ~$10.53 a share. Mingyu (Michael) Li is Horizon Space Acquisition’s primary sponsor, funding $3 million of the SPAC personally.

Did SL Bio Make The Right Choice?

Despite the seemingly numerous benefits of small firms using SPACs, there are serious downsides to consider as well. Primarily, SPAC sponsors take an average 20% promote (founder shares + warrants which convert to public shares during the de-SPAC transaction) which can dilute public shareholder payout. This issue is worsened by PIPE investors receiving discounted shares. Capital redemption is also risked as the SEC tries to protect shareholders by allowing for early share redemption. If too many shareholders flee prior to the merger, influence is shifted away from long-term shareholders and PIPE reliance is forced to increase. 

Lastly, incentives are misaligned. Sponsors make their profit by closing deals, long-term performance is insignificant. Biotech performance is, however, primarily determined in the long-run. This difference can prove costly as demonstrated by Nikola’s 2020 merger with VectoIQ. VectoIQ brought the company public too early without enough data, and Nikola quickly burned through their cash, was convicted of securities fraud, and in February of 2025 filed for Chapter 11 bankruptcy.

Yet, with the high risk that SL Bio poses considering their ambitious plans to industrialize a market whom many have tried and failed to industrialize, a SPAC merger is likely their best bet. 

The biotech firm has stressed the importance of investors and their need for capital. Their treatments are mainly in preclinical trials which makes promises of future success difficult to prove. If not for Horizon Space Acquisition, the much needed capital to fuel SL Bio’s research would be near impossible to come by. Therefore, it can be concluded that SL Bio made the best choice in their position and, although their chances of success are slim, their performance will be exciting to follow in coming years.