On May 11, biotech company Ginkgo Bioworks agreed to go public by merging with SPAC Soaring Eagle Acquisition (SRNG). The companies have just completed their business combination. What's Ginkgo’s stock forecast, and will it go up after the merger?
Ginkgo is developing a platform for cell programming that will be used by companies in several industries to identify more effective and environmentally friendly methods to manufacture products like food ingredients, fragrances, cosmetics, and medicines.
SRNG and Ginkgo merger details
Ginkgo completed its business combination with SRNG on Sept. 16. Its common stock and warrants started trading on the NYSE under the new ticker symbols “DNA” and “DNA.WS,” respectively, on Sept. 17. The merger deal was approved by SRNG shareholders on Sept. 14.
As part of the deal, Ginkgo was set to receive $2.5 billion in gross cash proceeds, including $775 million in PIPE investment at $10 per share. However, after the merger approval and redemptions, the company will receive $1.6 billion in gross cash proceeds.
Ginkgo’s stock forecast
No analysts cover Ginkgo stock yet, but that will likely change. SRNG has assigned Ginkgo a pro forma implied equity value of $17.8 billion and an EV of $15.2 billion, which gives it a 2025 EV-to-sales multiple of 13.8x and an EV-to-adjusted EBITDA multiple of 91.6x. In comparison, 10x Genomics and AbCellera Biologics have NTM EV-to-sales multiples of 29.2x and 109.2x, respectively.
Ginkgo estimates that the addressable market opportunity for bioengineered products is worth $2 trillion to $4 trillion. The company aims to increase the number of new biological program customers on its platform from about 20 right now to over 500 by 2025.
SRNG SPAC redemptions
About 50 percent of SRNG SPAC’s public shares were redeemed. According to Fintel, SRNG had a FINRA short volume ratio of 45 percent on Sept. 16. The short interest looks high enough to trigger a short squeeze.
Ginkgo stock is a good long-term investment.
Ginkgo was founded in 2009 by a group of MIT scientists who wanted to create made-to-order microbes that would allow customers to grow instead of manufacturing better products. The firm calls itself the “organism company” because it creates and prints DNA, which is the cornerstone that supports all living things.
Investors in Ginkgo stock include Cathie Wood’s Ark Investment Management, Bill Gates’ private investment arm Cascade Investment, Bain Capital, and T. Rowe Price. Overall, bioengineering and genomics appear to be promising investment areas in the coming decades.
Will Ginkgo stock go up after the merger?
On its first day of trading on the NYSE, Ginkgo stock rose nearly 10 percent. The stock appears to have bright prospects. Ginkgo expects to generate revenues of $100 million in 2021, $341 million in 2023, and $1.0 billion in 2025. These figures solely reflect revenue from foundries and don’t include contributions from emerging businesses.
Gingko sees the downstream business adding significant shareholder value and has estimated the firm’s present value at $25 billion. Ginkgo intends to become adjusted EBITDA-positive in 2025 and projects its adjusted EBITDA growing to $166 million in the same year.