Soaring Eagle Acquisition Corp. (NASDAQ:SRNG) is set to merge with bio tech company Ginkgo Bioworks in a $15 Billion deal. The mammoth deal is expected to provide the biotech company $2.5 Billion in primary cash proceeds to fund future growth within multiple industries. Ginkgo Bioworks program living cells to utilise their potential across a vast range of industries including vaccines and therapeutics to developing renewable plastics. Investors are now asking how much potential does the merger hold and what is mid-long term outlook of Ginkgo Bioworks. Therefore, this article will breakdown everything investors need to know about the SRNG merger and the future of Ginkgo Bioworks.
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Key details surrounding the Ginkgo and SRNG merger
- The pre-merger value of the combined companies is $15 billion.
- The transaction is expected to provide up to $2.5 billion of primary proceeds to the combined company. Furthermore, $1.725 billion will be sourced from Soaring Eagles Trust Fund whilst the other $775 million will be sourced from PIPE investments.
- The transaction is expected to close in the third quarter of 2021 (between 1 July – 30 September).
- In addition, Ginkgo expects to generate $150 million in revenue in 2021. This illustrates a YOY growth of 96% growth from 2020.
“Ginkgo is not only a leader in this field, but its founders launched the modern practice of synthetic biology. There has never been a more critical time to employ Ginkgo’s technological achievements and efficiencies toward solving so many real-world problems—environment, food, and health to name a few.”said Harry E. Sloan, CEO of Soaring Eagle.
Why are investors excited about Ginkgo Bioworks?
Firstly, Ginkgo Bioworks are tapping into a market worth nearly $40 Billion according to the company. This same market of R&D spending is expected to grow to $58 Billion by 2023, illustrating a growing market opportunity for the company to break into.
The company expects to generate $150 Million in revenue in 2021 and $175 million by 2022. By 2025, the company forecasts revenue to reach upwards of $1.09 Billion and with an EBITDA of $166 Million. In addition to this, between 2023-2025 the company expects YOY revenue growth to range between 75%-95%. The positive 4 year outlook on revenue growth is a greenlight for long term shareholders.
However, it’s important to note that these forecasts are subject to change and revenue guidance from future earnings results will generally indicate this. Furthermore, the company is currently running at a loss and does not expect EBITDA to become positive until 2025.
Summarising the SRNG merger
In summary, the proposed merger is one of the largest SPAC deals of 2021 so far. Looking at the revenue forecasts for the next four years, the company looks well positioned to break into an untapped R&D market. However, the SPAC market on Wallstreet has been volatile this year with many blank check companies now trading below the PIPE pricing. Market volatility will be an influence on the SRNG stock price pre-merger, which may exceed some investors risk appetite.
Written by Tyger Fitzpatrick
The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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