SPAC-on-SPAC Deal Falls Apart, and So Does Immunovant’s Stock

  • Roivant backs away from full buyback of its drug developer
  • Instead, Roivant plows in $200 million to support more testing

A private drugmaker aborted plans to buy back its own SPAC at a hefty premium, sending shares of Immunovant Inc. plunging to an all-time low.

The withdrawal by Roivant Sciences Ltd. unwinds part of its plan to go public by selling itself to a special-purpose acquisition company, and then using the proceeds to reacquire full ownership of Immunovant, which it merged into another SPAC in 2019. Immunovant’s stock, which topped $53 last year, tumbled as much as 26%, changing hands for as little as $7.77.

Instead, Roivant said in a statement Monday, it bought roughly 17 million shares for about $200 million that will fund continued development of Immunovant’s treatment for autoimmune diseases. That pushes Roivant’s stake to 63.8% from 57.5%. It picked up those shares at an average of $11.75 each, which Roivant said was a 15% premium to the recent average price. Roivant still plans to proceed with its own SPAC merger.

“Roivant and Immunovant explored a range of possible transactions over the past few months, including a potential acquisition by Roivant of the minority interest in Immunovant, and ultimately agreed on this significant investment,” Matt Gline, Roivant’s chief executive officer, said in the statement.

The reversal could further erode the wobbling enthusiasm for SPACs, which collectively have lost about a quarter of their value since their February peak amid several spectacular collapses and a regulatory crackdown. They’re often called blank-check companies because they raise money from investors with the goal of buying an existing private business, typically without identifying a target until later.

“Roivant’s decision to pursue a smaller equity investment likely removes the near-term possibility of a full acquisition,” Credit Suisse analyst Tiago Fauth said in a report that cut Immunovant to underperform from a previous neutral rating.

Read More: A SPAC Will Buy Back Its Own SPAC and Pay a Staggering Premium

Roivant’s original plan was the first known instance of a SPAC-on-SPAC deal, and it raised eyebrows earlier this year after it was outlined in filings. In a circular scenario, Roivant wanted to merge with SPAC Montes Archimedes Acquisition Corp., after which it planned to re-acquire Immunovant at a substantial premium that Robert W. Baird & Co. estimated could amount to $1.1 billion.

“There’s no change whatsoever to our planned merger with the Montes Archimedes SPAC,” said Roivant spokesman Paul Davis. “We expect that will close this quarter.”