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23andMe Set To Go Public Via A Virgin Group SPAC Merger

The genome research company joins the SPAC trend.
(Nevodka)
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23andMe is going public through a SPAC merger set up by Richard Branson and Virgin Group, TechCrunch reports.

Tell Me More: 23andMe is merging with VG Acquisition Corp and the transaction will value the company around $3.5 billion. All in all, 23andMe is expected to receive around $894 million in cash from the deal, which it intends to use on product development, hires and other growth strategies.

Chalk up another win for SPAC mergers. Last year set new records with 248 SPAC IPOs with roughly $83 million in gross proceeds raised, according to SPACInsider.com. This year is already off to a hot start with 105 SPAC IPOs and more than $30 billion in gross proceeds raised.

The Background: 23andMe is a genetics testing and genome research company that allows people to “ find out more about their own DNA, and what it says about their potential health issue, ancestry and more.” Co-founder Anne Wojcicki first launched operations in 2006 and has raised just under $900 million to date. It netted $85 million in a Series F round a few months ago.

  • More recently, the company has started using its massive genetic library as a research resource to develop future therapies and treatments.
  • It generates revenue through “aggregated, anonymized sharing of the data it collects with third-parties, for research and business purposes.”

The Bottom Line: The deal is expected to close in Q2 and the newly formed company will trade under the ticker “ME.”

Justin Oh:

23andMe is best known for their Ancestry Service, which allows customers to see their ancestry composition and DNA relatives, but more importantly for the company, it allowed them to build an absolutely massive DNA database. In data analytics, access to data is one of the most important barriers to entry and enabler of economic value.

They have expanded on this into a Health Service that provides health predispositions, wellness, carrier status, and pharmacogenetics. They are touting this as a subscription product in the next phase of their direct-to-consumer journey.

Lastly, they are aiming to transform drug discovery by leveraging their genetic database and research. This, to me, has huge potential, and is a big reason why ARK is extremely interested in the genomics space. 

The SPAC that 23andMe is going public through is VG Acquisition Corp ($VGAC). The stock is up to $15.00 per share in pre-market trading.

23andMe is targeting to have $317 million in Revenue and $174 million in Gross Profit in 2023 and $400 million in Revenue and $232 million in Gross Profit in 2024. 

They estimate growth to scale from 17-26% going forward, but interestingly enough, they’re seeing revenue declines from 2019 to 2021. This is definitely something to research before buying into this stock.

$15.00 per share values the company at $5.7 billion, which is 32.7x 2023 Gross Profit and 24.5x 2024 Gross Profit. It’s a super valuable and buzzy asset, but the valuation and revenue declines require us to do more digging before buying this one today.

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