Investors, particularly hedge funds, are doing a paltry number of venture capital deals. In fact, only a few managers have made more than one or two investments this month — even after a quiet first quarter.
But hedge funds — especially those that specialize in life sciences and biopharma investments — are active in the post-IPO private placement market. Listed companies use private placements to raise additional capital from accredited investors such as mutual funds. (Securities law requires that these deals be marked at the stock’s closing price when the private placement is completed.)
A half-dozen or more hedge funds have participated in a number of deals that have been finalized in the past month. RA Capital Management, which has long been the sector leader in private markets, has been particularly active.
Five of the eight private transactions Perceptive Advisors has made this year have been post-IPO stock or debt, according to Crunchbase.
However, the deals haven’t always work out, at least in the short term, as the transactions dilute listed shares. In addition, the companies that have been selling their stock privately have not all been doing well at the time of issuance.
This week, in the most recent private placement, Jade Biosciences, a publicly traded biotechnology company focused on therapies for autoimmune diseases, completed a previously announced merger with Aerovate Therapeutics. The combined company, which began trading on Tuesday, will operate as Jade Biosciences.
Before the merger, Jade completed an oversubscribed private investment round that generated $300 million in gross proceeds. A slew of investors participated in the financing, including hedge funds Deep Track Capital, Braidwell, RA Capital, Soleus Capital, Avidity Partners, Deerfield Management, and OrbiMed.
Earlier in April, Edgewise Therapeutics, a biopharma company specializing in muscle disease, priced more than 9.9 million of its common shares at $20.13 each in a private placement. The deal closed April 3. Among the many participants in the offering were hedge funds RA Capital, Cormorant Asset Management, Janus Henderson Investors, OrbiMed, Paradigm BioCapital Advisors, and Perceptive Advisors.
The stock market didn’t react well. Shares of Edgewise closed Tuesday at $15.46, down about 23 percent from the private placement price. The stock had been trading in the mid-$30s as recently as early November.
Also in April, several hedge funds participated in Surrozen’s sale of stock, prefunded warrants, and warrants to purchase stock. Under the deal, the company at closing was to issue nearly 1.1 million shares of stock and prefunded warrants to purchase 40,000 shares at $15.50 and $15.4999, respectively.
New and existing investors, including hedge funds RA Capital Management, Nantahala Capital, Stonepine Capital Management, and StemPoint Capital, participated in the private placement. The stock closed Tuesday at $10.14, down about 35 percent from the private placement price. Surrozen says it is developing therapeutics for tissue repair and regeneration.
In February, several prominent life sciences firms participated in the private placement of nearly 36 million shares of Solid Biosciences for $4.03 each. The stock, however, closed Tuesday at $3.05 per share, off by 25 percent.
The participants in the deal for the life sciences company, which is developing precision genetic medicines for neuromuscular and cardiac diseases, included hedge funds Adage Capital Partners, Perceptive Advisors, and RA Capital.
