Shares of consumer genetics company 23andMe rose 21% in their trading debut Thursday, after the provider of home DNA test kits went public via a merger with Richard Branson’s special-purpose acquisition corporation, or SPAC, VG Acquisition Corp.
After a soft opening, the stock /zigman2/quotes/222659849/composite ME -2.69% moved higher through the session, propelled by expectations of strong demand for the company’s products amid a shift in consumer expectations for healthcare and greater awareness of health and wellness. The stock is trading on Nasdaq, under the ticker “ME.”
23andMe was founded in 2006 by Anne Wojcicki, Linda Avey and Paul Cusenza and offers individuals the chance to have their genes tested, providing them with information on health risks and ancestry. Consumers can order one of the company’s test kits, comprising a test tube for saliva collection that is then mailed to a laboratory for testing.
Jefferies analysts wrote last month about the rise in healthcare consumerism that has Americans taking increasing control of their health, a trend that was in place before the coronavirus pandemic of the past year but that has accelerated during the crisis.
“Consumers have long demanded the power to choose, which creates marketplaces of goods and services at varying degrees of price, quality, efficacy, and loyalty,” analysts led by Stephanie Wissink wrote in a 30-page report. “Next-gen consumers, led by millennials and Gen-Z, are transposing their discretionary expectations onto historically institutionally rooted social services, including essential health and wellness.”
The cost of genome mapping has fallen dramatically in the last 15 years, said the report, by about 100,000%, according to Jefferies’ estimates. That has given rise to companies like 23andMe and competitors, who are vying to offer consumers at-home DNA tests.
“With this level of personalization, consumer expectations around customhealthcare plans are also on the rise,” they wrote.
23andMe raised about $592 million in proceeds as part of the SPAC deal that it will use to expand its health and therapeutics business. Wojcicki will remain as CEO and work with the existing management team.
Read more: The rise of EV SPACs as the next version of the dot-com bubble
“Over 11 million people have joined 23andMe and are part of the community that is using genetics to transform how we diagnose, treat and prevent human disease,” she said in a statement.
Evan Lovell, chief investment officer of Branson’s Virgin Group and chief financial officer of SPAC VG Acquisition, will join the 23andMe board, along with Peter Taylor, president of nonprofit ECMC Foundation, which seeks to help low-income students with education, and a former CFO for the University of California system.
SPACs, or blank-check companies, raise money in an initial public offering and then have two years to acquire a business or businesses. The vehicle became extremely popular in 2020 during the pandemic and set records for dollar amount raised, although activity has slowed somewhat in 2021.
Don’t miss: The SPACsplosion has reached a reckoning
The deal comes at a time when the Renaissance IPO ETF /zigman2/quotes/207665280/composite IPO +1.23% is flat in the year to date, but remains up 61% over the last 12 months. The S&P 500 /zigman2/quotes/210599714/realtime SPX +1.29% has gained 13% in the year to date and is up 36% in the last 12 months.