Babylon shareholders lose out on restructuring deal

The British healthcare startup will return to private ownership

Investors in Babylon, the British healthcare startup that gained popularity during the pandemic are about to lose their money as the main lender of the company is ready to take over the business.

Babylon announced on Wednesday that London based credit fund AlbaCore Capital was restructuring and recapitalising the business.

AlbaCore, as part of this deal will modify the terms of a $300mn loan that it has already provided to Babylon and extend $34.5mn in new funding. Babylon stated that its core business operations will be transferred to AlbaCore and other investors.

AlbaCore “will exercise rights under its debt agreement” and will “not be paying any of its shareholders”. Babylon stated that the sale would take place without the approval or payment to its shareholders. Since Tuesday, shares have dropped by over 80 percent.

After a turbulent 18-month period of trading, in which the shares fell by 99 per cent, the digital healthcare company will return to private ownership.

This marks the end of a challenging period for Babylon. Former health minister Matt Hancock had hailed the company during the pandemic, calling it “revolutionary”. It grew quickly through partnerships with National Health Service.

Around 100,000 UK patients use Babylon Health’s GP at Hand, an app founded by British-Iranian entrepreneur Ali Parsa in 2013, to virtually access NHS general practitioners, who act as their primary healthcare provider.

The company received investments from Saudi Arabia’s sovereign wealth fund Swedish Venture Capital group Kinnevik, and data company Palantir. The company opted to go public in New York in October 2021 via a special-purpose acquisition company, instead of a London listing.

Before the listing, Babylon’s value was $4.2bn. It was expected to receive $575mn in cash from its merger with Alkuri Global, a company that issued blank cheques. When the vote date for the merger approached, 90 percent of shareholders redeemed their shares, despite having approved the deal. Babylon ended up with just $275mn cash.

The company cut staff and cancelled NHS partnerships to cope with the funding shortage. It also tried to sell parts of the business. The company’s net losses continue to increase, having more than doubled to $63.2mn for the three-month period ending March compared with $29.1mn the previous quarter.

Parsa, in November , described the performance of the company after its flotation as “unbelievable and unmitigated catastrophe” but stated that he is committed to reaching profitability.

Last year, Babylon issued reverse share spits to avoid delisting by a narrow margin after its shares failed a 30 consecutive trading day period to maintain a closing average share price of $1.

AlbaCore provided a $30mn bridge loan to Babylon, which equated to around two months’ worth of working capital. This was first reported by The Telegraph and companies house. It provided its first $200mn loan to Babylon in 2021.

Parsa has not responded to a comment request.

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