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January 27, 2020
Welcome to the SPAC Research weekly newsletter.

SPACs and Investor Relations
We've performed a number of studies seeking factors correlated with historical SPAC success. We've examined redemption count, trust account size, and time to deal announcement. We've looked by lead left and by how much equity the SPAC sold at deal closing. But what about by IR firm?

Investor relations are an interesting proposition for SPACs. Day one SPAC investors are mostly SPAC arb funds with little or no intention of sticking around for shares in the eventual target company. First-time sponsors frequently underestimate the challenge of the deSPAC process, especially in moving shares from SPAC arbs into the hands of would-be fundamental holders in the target company.

Many SPACs underperform at basic IR functions such as ensuring sell-side coverage, hosting an analyst day, and developing a modern website. So why aren't all SPACs using IR firms?

Looking back at all SPACs to IPO since 2015, 69 have closed an initial business combination. Thirty-six of those, or just over 50%, have engaged an external IR firm. How do the results compare for SPACs with and without an IR engagement?

SPACs with an external IR firm have clearly performed better. But we should be careful not to assume the entire gap is caused by IR engagement. Larger target companies and repeat sponsors are better positioned to hire IR firms and make the most of an IR firm's services.

Meanwhile, some smaller SPACs that sign deals with only a $5mm minimum cash condition forego IR. Those smaller-scale deals have been a drag on the results for the Without External IR category. On the flip side, the largest targets (by enterprise value) may already have a diverse investor base or publicly traded debt. That means they may be satisfied with their internal IR functions even if they've never executed a SPAC transaction before.

Of note here: We chose to use a simple average stock price for simplicity in this study. But it's worth mentioning our crusade that stock price is a shallow measure of deal quality. You can visit our newsletter archive to look at previous studies on equity sold at closing and SPAC performance vs. sector benchmarks.

Now let's take a look at the most active IR firms in the SPAC space:
We counted 12 US SPACs that ICR has represented with an aggregate size of $3.3bn. Those deals sold $4.3bn of equity at deal closings -- from all sources, including from SPAC trust accounts -- for an impressive Trust Conversion Ratio of 130%. Sard Verbinnen has represented five SPACs that also sport a combined 130% Trust Conversion Ratio.

Kekst, Gateway and The Equity Group have all represented multiple deSPACs in the US as well. And 11 other firms have represented one SPAC each.

Below, we look at average stock price for closed SPAC deals by IR firm. We'll caution against reading too much into the results. Remember, we feel that stock price is a shallow measure of SPAC performance. Still, it's interesting to see the aggregate performance.
ICR's 12 closed SPAC deals trade at an impressive average price of $10.62. Deals represented by Sard Verbinnen, Gateway and The Equity Group all trade with high average stock prices as well. Kekst's average performance is brought down by having represented Silver Run II (OTC: AMRQQ) and Boulevard II (NASDAQ: ESTR).

It's interesting to see that the SPACs represented by repeat IR players have higher current stock prices. The 11 SPACs represented by IR firms without repeat SPAC experience trade at an average price of $7.84. SPAC transactions present unique challenges and it's believable that an IR firm with plenty of experience with the product would be more successful.

We're working on a more detailed data set to quantitatively measure IR performance and we plan to update this study as more results come in.

News From the Past Week
IPOs and S-1's
  • SCVX Corp. (SCVX) raised $200mm for an acquisition in cybersecurity. SCVX is led by Michael Doniger, who has a quantitative background in asset management for Citadel, Green Owl Capital Management and SAC Capital. Management includes two principals from Strategic Cyber Ventures, a Washington, D.C.-based venture capital firm focused on cybersecurity. The board of directors also includes former US Senator and Director of National Intelligence Dan Coats. Credit Suisse is sole book-runner.
  • Gores Holdings IV (GHIV) became the second issuer to IPO with 1/4 warrant coverage in each unit, raising $400mm this week. Gores IV is the fifth SPAC from serial sponsor Alec Gores, whose SPAC history you can view here. Deutsche Bank and Morgan Stanley are joint book-runners.
  • CITIC Capital Acquisition Corp. (CCAC) filed to raise $200mm for an acquisition in energy efficiency, clean technology and sustainability, with a focus on Asia. CCAC is sponsored by CITIC Capital, a well-known name and global alternatives firm with over $29bn in AUM. The SPAC will be led by Fanglu Wang, a managing partner of the CITIC Capital Silk Road Fund and the chief investment officer of CITIC Kazyna Investment Fund I. Credit Suisse is sole book-runner.
  • UTXO Acquisition Inc. (UTXOA) filed to raise $50mm for an acquisition in decentralized computing. UTXO will be led by Wei Huang, the founder of Dake Data, a diversified blockchain and cryptocurrency company and Yuanyuan Huang, the managing member of Fundin LLC, a consulting firm providing IT consulting services to private real estate equity funds and developers. UTXO is seeking terms that are more sponsor-friendly than most recent Chinese SPAC teams have secured, with what is effectively a 24 month liquidation window and warrants that only have a four-year term (as well as a $16.50 redemption trigger). First time SPAC underwriter Unviest Securities is sole book-runner.

Tender Offers
  • The sponsor of Pure Acquisition Corp. (PACQ) purchased 17.3mm public warrants for $1 each in a tender offer that expired Friday 1/17/2020. PACQ also filed a preliminary proxy for another charter extension, this one through May 2020. PACQ's sponsor will launch another warrant tender in connection with the extension. Only 3.16mm public warrants remain outstanding, and it's worth noting the warrant agreement's threshold for amendment is the consent of 50% then-outstanding warrants. PACQ's sponsor currently holds 76% of outstanding warrants.
  • TKK Symphony Acquisition Corp. (TKKS) again extended the company's tender offer deadline, this time until 2/10/2020. Over 98% of shares were validly tendered and not withdrawn as of Thursday 1/23/2020.

Additional Financing
  • Boxwood Merger Corp. (BWMC) announced $155mm in additional financing from GSO Capital Partners, the credit arm of Blackstone, for its business combination to form Atlas Technical Partners. Most of the additional financing comes in the form of non-convertible preferred equity. Atlas' private equity owner, Bernhard Capital Partners also agreed to an increased equity rollover of up to $50mm and BWMC's sponsor agreed to forfeit up to 35% of its founder shares depending on the level of capital raised for the deal outside the GSO agreement. With the deal now fully financed, BWMC postponed the deal's approval meeting until 2/6/2020 to give public shareholders more time to consider the transaction.

Charter Extensions
  • Gordon Pointe Acquisition Corp. (GPAQ) held a shareholder meeting Friday 1/24/2020 to extend its charter for up to two months. GPAQ's sponsor will contribute $0.033 per month for each remaining public share. Results of the meeting have not been released.
Disclosures: Site administrators are long SCVX.U, GHIVU, TKKSR, TKKSW, BWMCW, GPAQW and may trade in or out of positions in these or other SPAC securities at any time. Nothing on is a recommendation or solicitation to buy or sell any investment.