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SPAC vs IPO vs Direct Listing: The Biotech Public Markets Guide

Pros, cons, and practical considerations for every public market path — what each route means for biotech founders, investors, and existing shareholders

Updated Q4 2025  |  BioPharmaWire Editors  |  Sources: SEC filings, Pitchbook, BioCentury, Renaissance Capital, public company disclosures

Going public is one of the most consequential decisions a biotech company makes. It determines the investor base, the reporting cadence, the management bandwidth committed to investor relations, and the public scrutiny applied to every clinical readout for the remainder of the company’s independent life. The choice of mechanism — traditional IPO, SPAC merger, or direct listing — shapes all of these outcomes. This guide covers all three paths with the specificity that biotech founders and investors actually need.

The Three Paths Compared

Colour key:  Traditional IPO  SPAC Merger  Direct Listing / RPO

Feature	Traditional IPO	SPAC Merger	Direct Listing / RPO
What it is	Company sells newly issued shares to public investors through underwriting banks. Price set via bookbuild process.	Private company merges with a blank-cheque public vehicle (SPAC) that already holds IPO proceeds in trust.	Direct listing: existing shares listed without new capital raise. RPO: registered direct offering of new shares to institutional buyers without full IPO process.
Primary purpose	Raise new capital + achieve public listing simultaneously. Most common biotech path to public markets.	Achieve public listing + raise capital (via PIPE) with a negotiated valuation and faster timeline.	Direct listing: achieve liquidity for existing holders without new capital. RPO: raise capital efficiently with fewer disclosure requirements than full IPO.
Timeline to completion	4-6 months from decision to pricing. S-1 registration, SEC review, roadshow, and pricing all required.	3-6 months from SPAC identification to close. De-SPAC merger proxy required; SEC reviews both SPAC and target disclosures.	Direct listing: 3-4 months. RPO: 2-6 weeks for well-positioned companies with existing investor relationships.
Valuation mechanism	Market-determined through bookbuild. Underwriters set price range; institutional demand sets final price. Founder/VC can accept or withdraw.	Negotiated between SPAC sponsor and target management. Valuation agreed pre-announcement; not subject to bookbuild demand validation.	Direct: reference price set by exchange; opens at market. RPO: negotiated with lead investor(s); typically at a discount to last financing round.
Capital raised	Substantial: $50M-$500M+ typical for biotech IPOs. Proceeds go to company. Primary capital raise.	PIPE (Private Investment in Public Equity) concurrent with merger raises additional capital. Typical PIPE: $50M-$200M. SPAC trust provides additional capital.	Direct listing: no new capital raised (liquidity only). RPO: targeted raise, typically $20M-$150M, with selected institutional buyers.
Underwriting cost	Typically 5-7% of gross IPO proceeds (2.5% upfront + 3.5% deferred, paid at closing). For $100M raise: ~$6M in underwriting fees plus $2-4M legal/accounting.	SPAC sponsor receives 20% founder shares (‘promote’) as compensation — a significant ongoing dilution to public shareholders and company. PIPE placement fees additional.	Direct listing: no underwriting commission; lower overall transaction cost (~2-3% of proceeds equivalent). RPO: placement agent fee 4-6%.
Lock-up period	Standard 180-day lock-up for insiders (founders, VCs, management). Underwriters can release early at discretion.	Lock-ups negotiated; typically 6-12 months for management, 6 months for SPAC sponsor (subject to earn-out conditions).	Direct listing: no lock-up by default; existing holders can sell from day 1. RPO: lock-up negotiated with investors, typically 30-90 days.
SEC disclosure requirements	Full S-1 registration statement with audited financials (2 years), MD&A, risk factors, and prospectus. Reviewed by SEC Division of Corporation Finance.	S-4 (merger proxy) plus target company financials. Requires PCAOB-audited financials for target. SEC reviews both SPAC shell and merger proxy.	Direct: S-1 required. RPO via shelf registration (S-3) if already public, or S-1 if not. PIPE under Rule 144A may avoid full registration pre-close.
Projections / forward guidance	Projections NOT permitted in IPO prospectus (S-1). Only historical financials. This is a major constraint for pre-revenue biotechs.	Projections ARE permitted in SPAC merger proxy (S-4). This was a key SPAC advantage for early-stage biotechs — ability to show pipeline milestones and revenue ramp.	Direct listing: same constraints as traditional IPO (no projections in S-1). RPO: if private placement component, some forward-looking discussion with investors permitted.
Investor base quality	Access to full institutional market: long-only funds, crossover investors, hedge funds, retail via secondary. Broadest possible distribution.	Limited to SPAC trust holders plus PIPE investors. SPAC investor base typically hedge-fund dominated with high redemption risk. Post-merger float often small.	Direct listing: institutional investors only at open; retail access limited. RPO: targeted institutional buyers; not broadly distributed.
Redemption risk	None. IPO investors have committed capital; no redemption mechanism.	High. SPAC shareholders can redeem (get their money back) before the merger vote. High redemption rates (>50%) have left many de-SPAC companies with less cash than planned.	None for direct listing. RPO investors typically locked up; no redemption mechanism.
Typical biotech suitability	Best for companies with Phase 2 data, 18+ months runway post-IPO, and a clear near-term catalyst. Works best in supportive IPO market windows.	Was attractive 2020-2021 for pre-clinical or Phase 1 companies. Now largely disfavoured post-SEC scrutiny and poor post-merger performance. Rare in 2024-2025.	Direct: best for large, well-known companies with existing investor demand. RPO: useful for smaller capital raises or bridge to full IPO.
Post-listing performance (historical)	Variable but generally better than SPAC. Median 1-year return for biotech IPOs (2019-2024): -15% vs IPO price. Positive catalyst performance is key.	Poor on aggregate. Median de-SPAC biotech 1-year return (2020-2022): -60% vs merger price. SPAC premium at close frequently evaporated within 12 months.	Limited biotech data. Direct listings used mainly by large-cap tech. RPO performance depends on terms and catalyst timing.
Current market status (2025)	Primary path to public markets. IPO window opened partially in mid-2025 after 2022-2024 drought. Selective: Phase 2 data and clear catalysts required.	Largely dormant in biotech. SEC’s 2022-2023 SPAC rule changes and poor post-merger performance have made biotech SPACs rare. A few still active in specialty pharma.	RPO increasingly used as a tool for public biotech companies raising capital between catalyst readouts. Not a primary IPO alternative.

The Traditional IPO: How It Actually Works

Phase 1 — Preparation (Months 1-3)

The IPO process begins with selection of underwriting banks (‘bookrunners’). A typical biotech IPO involves 2-3 lead bookrunners (e.g. Goldman Sachs, Morgan Stanley, J.P. Morgan, Leerink, Evercore ISI) and 3-5 co-managers. Bank selection matters: the quality of the bookrunner signals market positioning and determines which institutional investors receive allocations. Confidential submission of the S-1 draft to the SEC (available under the JOBS Act for Emerging Growth Companies) allows the filing to be reviewed before public announcement, reducing the public exposure window.

Phase 2 — SEC Review and S-1 Filing (Months 3-4)

The SEC Division of Corporation Finance reviews the S-1 and issues comments (typically within 30 days of the initial confidential submission). Multiple rounds of comment-response are normal — 2-3 rounds is typical. Common SEC comment areas for biotech: clinical data disclosure sufficiency, risk factor specificity, related-party transaction disclosure, and use-of-proceeds clarity. Once comments are resolved, the company files the S-1 publicly (‘going effective’).

Phase 3 — Roadshow and Pricing (Weeks 1-2 of public filing)

The roadshow is a 10-14 day series of investor meetings conducted by the CEO and CFO with the bookrunners. Institutional investors submit non-binding indications of interest. The bookrunners assess demand and recommend a final price within the S-1 price range (or amend the range based on demand). Pricing occurs the evening before trading begins. The company and existing shareholders decide how many shares to offer and at what price — if demand is insufficient, the offering is withdrawn.

Tip:  The roadshow is the most important 10 days in the IPO process. CEOs who cannot clearly articulate the science, the development plan, and the financial ask in 45 minutes will not price above the midpoint. Prepare for 8-10 meetings per day with detailed Q&A.

Phase 4 — Aftermarket Stabilisation

The lead bookrunner has an option to purchase an additional 15% of shares (the ‘greenshoe’ or over-allotment option) to stabilise the stock in the 30 days after the IPO. If the stock trades below the IPO price, the bookrunner buys shares in the open market to support the price, exercising the greenshoe creates additional supply if the stock trades above. The 180-day lockup prevents insiders from selling, maintaining supply discipline in the early aftermarket.

The SPAC: Why It Boomed and Why It Largely Failed

The SPAC Mechanism

A Special Purpose Acquisition Company (SPAC) is a blank-cheque company that raises capital through its own IPO — typically at $10 per share — and holds the proceeds in a trust while searching for a private company to acquire (the ‘de-SPAC merger’). The SPAC has a defined timeframe (typically 18-24 months) to complete a merger or return funds to shareholders. The private company that merges with the SPAC becomes publicly listed as a result.

The SPAC mechanism was attractive to early-stage biotechs for two reasons: first, the valuation was negotiated rather than market-determined, allowing pre-revenue companies to command higher valuations than a traditional bookbuild might support; second, the S-4 merger proxy permitted forward-looking financial projections, which the S-1 does not.

Why Biotech SPACs Failed on Aggregate

The SPAC boom of 2020-2021 produced dozens of biotech de-SPAC mergers, most of which have significantly underperformed. The core problems: SPAC valuations were set at the peak of market sentiment and bore little relationship to the clinical or commercial milestones actually achieved post-merger; SPAC redemption rates were high (often 60-80% of SPAC shareholders redeemed before the vote), leaving companies with far less cash than planned; and the SPAC investor base — dominated by hedge funds seeking arbitrage rather than long-term holders — created selling pressure from the first trading day.

The SEC responded with new SPAC rules in 2022-2023 that increased disclosure requirements, reduced the liability shield for forward-looking projections, and required additional information about SPAC sponsor conflicts. These rules, combined with the collapse in post-merger stock performance, have made biotech SPACs rare in 2024-2025.

Watch out:  Any biotech currently considering a SPAC merger should model redemption scenarios down to 90% redemption. The trust proceeds are not guaranteed capital — they are contingent on shareholder votes, and hedge fund arbitrageurs will redeem if the merger terms do not offer sufficient return. PIPE commitments should be secured before the merger announcement.

Direct Listing and RPO: The Emerging Alternatives

Direct Listing

A direct listing allows a company to list its existing shares on a public exchange without issuing new shares or raising capital. It is primarily a liquidity mechanism for existing shareholders — employees, early investors, and founders who want to sell shares. No underwriting commission is paid; instead, a financial advisor fee (typically 1-2% of proceeds equivalent) is charged. The opening price is determined by supply and demand on the first day of trading, without the price-setting mechanism of a bookbuild.

Direct listings are rare in biotech because most biotech companies going public need new capital, not just liquidity. They are primarily used by large, profitable technology companies (Spotify, Coinbase, Palantir used this route) with strong brand recognition and pre-existing institutional demand. A pre-revenue biotech without an established investor following is unlikely to attract sufficient demand in a direct listing to establish a stable opening price.

Registered Public Offering (RPO) / At-the-Market (ATM)

For already-public biotech companies, Registered Public Offerings — conducted via a shelf registration (S-3) with specific takedowns — and At-the-Market (ATM) programs provide efficient capital raising tools without a full IPO process. An ATM allows a company to sell shares incrementally into the open market at prevailing prices through a designated agent. This is a standard tool for public biotech companies managing runway between clinical catalysts and is not an IPO alternative but a post-IPO capital management tool.

Case Studies: What the Data Shows

Note:  The following case studies illustrate the range of outcomes across IPO and SPAC paths. They are illustrative, not comprehensive. Stock performance reflects conditions as of late 2024 / early 2025.

Company	Path	Year	Raised	Outcome	Lesson
Moderna	IPO	2018	$604M	One of the largest biotech IPOs ever. Pre-revenue mRNA platform. Stock languished until COVID-19 vaccine approval (2020), then 10x.	Platform IPOs need a near-term catalyst or a very patient institutional base. Moderna survived the wait; most platform-only companies don’t.
BioAtla	IPO	2020	$237M	Conditionally active antibody (CAB) platform. Strong debut at peak 2020 market. Stock declined 80%+ as clinical data disappointed.	Peak market IPOs expose clinical-stage companies to high expectations. Data disappointments are punished severely in the public market.
Ginkgo Bioworks	SPAC	2021	$1.7B (SPAC+PIPE)	Merged with Soaring Eagle at ~$17.5B valuation. Stock declined 95% from peak. Never achieved profitability.	Synthetic biology platform with no near-term drug revenue. SPAC valuation bore no relationship to near-term fundamentals.
23andMe	SPAC	2021	$759M	Consumer genomics company merged with VG Acquisition. Filed for Chapter 11 bankruptcy (2024). SPAC investors lost nearly all capital.	Consumer health + SPAC + no drug revenue = structural mismatch. SPAC mechanism amplified a fundamentally unworkable commercial model.
Owlet	SPAC	2021	$135M	Smart baby monitoring via SPAC. FDA warning letter on blood oxygen monitoring. Stock fell 95%+.	Regulatory risk not priced into SPAC valuations. De-SPAC companies with outstanding regulatory questions are high risk.
Roivant Sciences	IPO	2021	$3.0B	Large, diversified biopharma platform. IPO on Nasdaq at $18, traded down significantly. RVT-3101 and other assets later showed Phase 2 activity.	Size alone doesn’t protect a biotech IPO. Diversification can obscure asset quality.
Kymera Therapeutics	IPO	2020	$238M	PROTAC/protein degradation platform. Strong institutional support at IPO. Multiple programs advanced to Phase 2 post-IPO.	Science-first IPO with clear differentiation and institutional conviction. Demonstrates what a well-timed platform IPO can look like.
Protagonist Therapeutics	IPO	2016	$69M	Peptide platform; slow Phase 2 progress. Rusfertide (PV) Phase 3 data in 2024 drove stock 5x from trough. Near-acquisition by Novo.	Clinical-stage IPOs with long development timelines need patient management and investors. Persistence with the right asset pays off.
Vor Biopharma	IPO	2021	$228M	Engineered HSC + matched CAR-T for AML. Phase 1/2 ongoing. Stock volatile but platform thesis intact post-IPO.	Novel modality IPOs require sustained investor education. Being first with a concept is valuable but slow to reflect in the stock price.
Recursion Pharmaceuticals	IPO	2021	$436M	AI drug discovery platform. REC-994 in Phase 2 for CCM. Nvidia strategic investment (2023) re-rated the stock.	Platform IPOs benefit enormously from strategic partnerships that validate the technology. Nvidia’s investment was a turning point.

Deciding Which Path is Right: A Framework

Choose a Traditional IPO When:

You have Phase 2 data with a clear efficacy signal in a defined patient population. You can articulate 2-3 near-term catalysts (Phase 2 readout, IND filing, partnership) within 18 months of IPO. You have 18-24 months of runway post-IPO planned with the raise. The IPO market window is open (defined by recent comparables pricing above range and trading up). You have crossover investor support from institutions that participated in the pre-IPO round.

Consider a SPAC Only When:

You have an identified SPAC sponsor with strong sector credibility and a clean track record. The SPAC trust is large enough to fund your program even after 70-80% redemptions. You have PIPE commitments from institutional investors before announcing the merger. You are genuinely unable to access the traditional IPO window due to market conditions or stage of development. Even then, engage independent financial and legal advisors with SPAC-specific experience — the conflicts of interest in SPAC structures are significant.

Extend the Private Timeline When:

You do not yet have Phase 2 data. The IPO market window is closed (defined by recent biotech IPOs pricing below range or trading down significantly). Your last private valuation is higher than what the public market would currently support. You have private capital available to fund the next value-inflection milestone. Going public at the wrong time or at the wrong price is more damaging than staying private longer — dilution at a depressed valuation compounds through all future financing rounds.

Key Questions to Ask Before Going Public

1. What is the near-term catalyst that will drive the stock post-IPO? Public biotech stocks are driven by clinical readouts. If there is no Phase 2 or Phase 3 data readout within 18 months of the IPO, the stock will likely drift lower as investors wait.
2. Do we have the management team bandwidth to be a public company? Being public requires a CFO experienced in SEC reporting, an investor relations function, quarterly earnings calls, and continuous disclosure obligations. These are not trivial — they consume significant management time and money.
3. Is the current public market valuing comparable companies fairly? The public market can be irrationally pessimistic about biotech for extended periods. Going public when comparables are trading at 50% of their last private round valuation is value-destructive.
4. What happens if the IPO prices at the low end of the range? Model the company’s financial position assuming the IPO raises 30% less than the target. If that scenario leaves insufficient runway to reach the next milestone, the IPO is undercapitalised and should be reconsidered.
5. Have we done a crossover round? A crossover round — where institutional public market investors (typically hedge funds and long-only biotech funds) invest in the company before the IPO — is the strongest signal of IPO readiness. Crossover investors provide price discovery, institutional credibility, and a committed investor base for the IPO book.

This guide is an editorial product of BioPharmaWire based on publicly available information and market data as of Q4 2025. It does not constitute financial, legal, or investment advice. Companies considering a public offering should engage experienced investment bankers, securities counsel, and independent financial advisors. Past IPO and SPAC performance is not indicative of future outcomes.