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August 10, 2020
Welcome to the SPAC Research weekly newsletter.

Sponsor Concessions
Back in February, we looked at all the closed SPAC deals over the previous year and lined them up according to how much of the sponsor's promote was subject to forfeiture or earnout. We found that in general, deals where the sponsor has been willing to give something up or put some shares at the back of the line have traded significantly better than those where the sponsor held on to 100% of its promote.

It seems like a lifetime has passed since mid-February, and lots of exciting deals have closed since then. So we wanted to update our study and provide additional context on promote concessions for recent SPAC deals.

First, here's an updated look at the whole data set. The y-axis is current market price, and the x-axis represents the fraction of the sponsor's promote they held onto without any strings attached. Promote shares subjected to an earnout are considered forfeit even if they have since vested.
Deals where the sponsor has been willing to make promote concessions have traded better than deals where the sponsor held onto its entire promote. And among deals where the sponsor held onto its entire promote, only Nikola (NASDAQ: NKLA) and Vertiv (NYSE: VRT) are trading above $15.

How often do sponsors make some concession to their promote shares?
You can see from the histogram that only 17 of 49 sponsors to close SPAC deals since the beginning of 2019 held onto their entire promote. Many of those were smaller SPACs focused on niche sectors or geographies. Here's what the histogram looks like if you remove SPACs smaller than $200mm at IPO, demonstrating that very few sponsors of larger SPACs manage to hold onto their entire promote unconditionally.
The days when a SPAC sponsor had to educate its acquisition target about the basics of SPAC mechanics are in the past. While lots of exciting companies are considering SPAC listings now, many are likely feeling opportunistic and courting multiple SPACs at once. Most sponsors will say they don't engage in bidding wars. But you can bet targets are well-advised and know they can ask sponsors to at least put promote shares behind an earnout to align everybody's incentives.

Sponsors often target the size of their SPAC based on the size of the enterprise they hope to acquire. Roughly -- if you're looking at companies that are worth around $1bn, you might raise a $200mm SPAC because your $50mm worth of promote shares will feel like a palatable amount of dilution to the target.


Given that, we wanted to examine sponsor concessions relative to deal size. Last month, we introduced a metric we called the EV/Trust Multiple -- that is, the size of the acquired business relative to the size of the SPAC's trust account. For example, a $200mm SPAC that acquires a $1bn enterprise would have an EV/Trust Multiple of 500%.

Do sponsors whose promote is smaller relative to the ultimate acquisition target end up making fewer concessions?
We were expecting higher EV/Trust Multiples to have a strong correlation with higher promote retention. The relationship exists across the entire data set, but it gets even stronger if you restrict the sample to SPAC deals over $500mm in enterprise value, as shown below.
We've discussed the challenges with using an enterprise value calculated off of a nominal $10 share price before. But larger SPAC deals do appear to present situations that allow sponsors to hold onto a larger portion of their economics.

Obviously there are many soft factors at work here, including each sponsor's ability to add value to a target operating company and where each SPAC is in its life cycle as a negotiation is taking place. But the topic of promote concessions is likely coming up in every conversation between SPACs and operating targets, and recent precedent can help guide both sides toward fair compromise.

For institutions interested in the full sponsor concessions and earnouts data set, please reach out about an all access subscription or custom data inquiry.

SPAC Alpha
Luis Leon, a tax director at Marcum LLP, guest-authored a piece for SPAC Alpha this week on passive foreign investment company (PFIC) regulations that SPACs and investors should be aware of.

News From the Past Week

IPOs
  • GO Acquisition Corp. (GOAC) raised $500mm for an acquisition in travel-related businesses in North America and Europe. GOAC will be led by Co-CEOs Noam Gottesman and M. Gregory O'Hara. Gottesman was the co-founder of GLG Partners, a diversified multi-strat investment fund, and also co-founded Nomad Holdings and Landscape Acquisition, each $500mm SPACs that were listed on the LSE. O'Hara is the founder of Certares Management, an investment firm focused on the hospitality and consumer sectors. Credit Suisse, Citigroup, and Morgan Stanley are joint book-runners.

  • Gores Holdings V (GRSV) raised $475mm in an upsized IPO without a specific sector focus. GRSV is chaired by serial SPAC sponsor Alex Gores and brings back most of the team from his previous SPACs. Gores has two other active SPACs in the market -- Gores IV (GHIV), which raised $425mm in January 2020, and Gores Metropoulos (GMHI), which raised $400mm in February 2019. See here for a detailed history of the first three Gores SPACs. Deutsche Bank and Morgan Stanley are joint book-runners.

  • BowX Acquisition Corp. (BOWX) raised $420mm for an acquisition in TMT. BOWX is led by Vivek Ranadivé, founder of Bow Capital Management, an early-stage venture firm, and co-owner of the NBA's Sacramento Kings since 2013. Ranadivé was also a co-founder of TIBCO, an enterprise infrastructure software company that IPO'd in 1999 and was sold to Vista Equity Partners in 2014 for $4.3bn. UBS is sole book-runner.

  • Yucaipa Acquisition Corporation (YAC) raised $345mm without a specific sector focus. YAC is led by Pittsburgh Penguins owner Ronald W. Burkle, who has also served as chairman and controlling shareholder of numerous companies in the retail, logistics and hospitality sectors including Pathmark Stores (NASDAQ: PTMK), Ralphs Supermarkets, Americold Realty Trust (NYSE: COLD), Eimskip Logistics (ICE: EIM), TDS Logistics, and Morgans Hotel Group (NASDAQ: MHGC). YAC has a $50mm forward purchase agreement with its sponsor, Yucaipa Acquisition Manager, LLC. Citigroup is sole book-runner.

  • Holicity Inc. (HOL) raised $275mm in an upsized IPO for an acquisition in TMT. HOL is led by Craig McCaw, the founder and former leader of McCaw Cellular Communications, Clearwire Corporation, and Nextel Communications. Deutsche Bank and BofA are joint book-runners.

  • Kismet Acquisition One Corp (KSMT) raised $250mm without a specific sector focus. KSMT is led by Ivan Tavrin, the founder of Kismet Capital Group, a private investment group he has managed since its inception in 2017. Credit Suisse and BofA are joint book-runners.

  • Health Sciences Acquisitions Corporation 2 (HSAQ) raised $160mm in an upsized IPO with no warrant coverage for an acquisition in biopharma and medical technology. HSAQ is led by Roderick Wong, MD, who has served as managing partner and CIO of RTW Investments, a healthcare-focused investment firm. Wong and much of HSAQ’s management team also led Health Sciences Acquisitions Corporation (HSAC), which raised $115mm in May 2019 and acquired Immunovant Sciences Ltd. (NASDQ: IMVT) in December 2019. HSAQ also sports a $25mm forward purchase agreement with its sponsor, HSAC 2 Holdings, LLC. Chardan and Barclays are joint book-runners.

  • ARYA Sciences Acquisition Corp III (ARYA) raised $130 in an upsized IPO with no warrant coverage for an acquisition in life sciences and medical technologies in North America and Europe. ARYA is led by Joseph Edelman, who along with Adam Stone, Michael Altman, and Todd Wider, led ARYA Sciences Acquisition Corp. (ARYA), which raised $144mm in October 2018 and acquired Immatics Biotechnologies in July 2020, and ARYA Sciences Acquisition Corp. II (ARYB), which raised $130mm in June 2020 and is currently seeking a business combination. ARYA III is the third SPAC this year to file with no warrant coverage. Jefferies and Goldman Sachs are joint book-runners.

  • Vistas Media Acquisition Company Inc. (VMAC) raised $100mm for an acquisition in media and entertainment. VMAC is led by F. Jacob Cherian, who co-founded I-AM Capital Acquisition, which raised $53mm in August 2017 and acquired SMAAASH Entertainment (NASDAQ: WINR) in December 2018. I-Bankers is sole book-runner.

S-1's
  • Foley Trasimene Acquisition Corp. II (BFT) filed to raise $1.2bn for an acquisition in FinTech or information and business services. BFT is chaired by William P. Foley, II and includes most of the team from Foley Trasimene Acquisition Corp. (WPF). WPF raised $1.035bn in May 2020 and is seeking an acquisition in FinTech or business process outsourcing. The SPAC will be Foley's fourth (see here for a detailed history). BFT also features a $150mm forward purchase agreement with Cannae Holdings (NYSE: CNNE), a diversified holding company also chaired by Foley. Credit Suisse and Bank of America are joint book-runners.
  • FTAC Olympus Acquisition Corp. (FTOC) filed to raise $750mm for an acquisition in FinTech. FTOC is chaired by Betsy Z. Cohen, former CEO of The Bancorp, Inc. (NASDAQ: TBBK) and chairman of the first three Fintech Acquisition Corps. (See here for a detailed history.) The SPAC will be led by CEO Ryan Gilbert, a general partner at Propel Venture Partners, a venture capital fund backed by BBVA Group. Citigroup and Cantor Fitzgerald are joint book-runners.
  • CF Finance Acquisition Corp. II (CFII) filed to raise $525mm for an acquisition in financial services, healthcare, real estate services, technology or software. CFII is a sequel to CF Finance Acquisition Corp. (CFFA), which raised $292mm in December 2018 and announced a business combination with GCM Grosvenor earlier this month. CFII brings back Howard Lutnick and Anshu Jain from CFFA, who are the CEO and President of Cantor Fitzgerald, respectively. Cantor Fitzgerald is sole book-runner.
  • TWC Tech Holdings II Corp. (TWCT) filed to raise $525mm for an acquisition in technology and technology-enabled services sectors. TWCT is led by Adam Clammer, a founding partner of True Wind Capital, a PE fund focused on technology. TWCT is Clammer's second SPAC, and retains the executive team from Nebula Acquisition, which raised $275mm in January 2018 and acquired Open Lending (NASDAQ: LPRO) in June 2020. TWCT sports a $100mm FPA. Citigroup and Deutsche Bank are joint book-runners.
  • Horizon Acquisition Corporation (HZAC) filed to raise $500mm for an acquisition in financial services, with a focus on differentiated financial services and financial services-adjacent platforms. HZAC is led by Todd Boehly, the co-founder, chairman and CEO of Eldridge, a holding company with a network of businesses across finance, technology, real estate and entertainment. Director David Minella founded Prospect, a SPAC that completed its $250mm initial public offering in 2007 and merged with Kennedy-Wilson (NYSE: KW) in 2009, creating a publicly traded REIT. Credit Suisse and RBC are joint book-runners.
  • FAST Acquisition Corp. (FST) filed to raise $200mm for an acquisition in restaurants and hospitality. FAST is led by Co-CEOs Sandy Beall and Doug Jacob. Beall is the founder of restaurant chain Ruby Tuesday, which grew under decades of his leadership to more than 800 locations with approximately 30,000 employees. Jacob is the founder and operator of multiple restaurant concepts, including the pizza chain &pizza. Chairman Kevin Reddy has served in executive roles for Chipotle and Noodles & Company, and is chairman of the board of directors of &pizza and Qdoba Mexican Grill. Citigroup and UBS are joint book-runners.
  • Colonnade Acquisition Corp. (CLA) filed to raise $200mm for an acquisition in natural resources, energy, real estate or agriculture. CLA is chaired by Joseph Sambuco, the founder of Colonnade Properties, a fully-integrated real estate investment, finance, operating and asset management company. CEO Remy Trafelet is the founder of Hazeltree Fund Services, which provides treasury solutions to financial institutions with over $2tn of assets under advisory, and the former CEO of Alico Inc. (NASDAQ: ALCO), an agribusiness holding company. BTIG is sole book-runner.
  • PMV Consumer Acquisition Corp. (PMVC) filed to raise $175mm for an acquisition in the consumer sector. PMVC is led by P. Kasper Jakobsen, who served as CEO and president of Mead Johnson Nutrition, a global consumer company focused on infant and child nutrition, from 2013 until its sale to Reckitt Benkiser PLC in 2017. The SPAC is sponsored by Gabelli Asset Management Company ("GAMCO"), and the team includes Joseph Gabelli, a portfolio manager in the consumer sector at GAMCO, and a number of others from the company. UBS and BTIG are joint book-runners.
  • Alpha Healthcare Acquisition Corp. (AHAC) filed to raise $100mm for an acquisition in healthcare in the United States. AHAC is led by Rajiv Shukla, whose first SPAC, Constellation Alpha Capital Corp. (CNAC), raised $145mm in June 2017 and acquired DermTech (NASDAQ: DMTK) in August 2019. CFO Patrick Sturgeon is a managing director at Brookline Capital Markets, where he has worked on numerous SPAC deals. Mizuho and Oppenheimer are joint book-runners.
  • HighCape Capital Acquisition Corp. (CAPA) filed to raise $100mm for an acquisition in life sciences. CAPA is led by Kevin Rakin and Matt Zuga, co-founders of HighCape Capital, a life sciences investment firm with a focus on active investing in commercial-stage companies. Rakin has been a CEO and board member for numerous public and private life sciences companies, including Advanced BioHealing, Inc., which was acquired in 2011 by Shire Plc for $750mm. Cantor Fitzgerald is sole book-runner

  • Industrial Tech Acquisitions, Inc. (ITAC) filed to raise $60mm for an acquisition in industrial and energy focused technology in North America. ITAC is led by E. Scott Crist, who has more than 30 years of business experience as an entrepreneur, venture capitalist and operating executive. Maxim is sole book-runner.

Deal Announcements, LOIs and Rumors
  • DiamondPeak Holdings Corp. (DPHC) announced a deal to acquire Lordstown Motors Corp., which says it will manufacture the first full-size electric pickup truck designed to serve the US commercial market. The deal reflects an implied equity value of $1.6bn and includes a $500mm PIPE led by Fidelity, Wellington and BlackRock. The transaction is expected to close in Q4 2020.
  • FinTech Acquisition Corp. III (FTAC) announced a deal to acquire Paya Inc., an integrated payments and commerce solutions provider. The deal reflects an implied enterprise value of approximately $1.3bn and includes a $250mm PIPE led by Franklin Templeton and Wellington. Private equity firm GTCR will remain the company's largest stockholder and closing is expected in Q4 2020.
  • CF Finance Acquisition Corp. (CFFA) announced a deal to acquire GCM Grosvenor, a global alternative asset management firm. The transaction values GCM Grosvenor at $2bn. The deal carries a $300mm minimum cash condition, of which $225mm is met by a $195mm PIPE and fulfillment of Cantor Fitzgerald's sponsor's $30mm forward purchase commitment.
  • Megalith Financial Acquisition Corp. (MFAC) announced a deal to acquire BankMobile Technologies, a digital banking platform that is a subsidiary of Customers Bank, which is chaired by MFAC's former Chairman Jay S. Sidhu. The deal reflects an enterprise value of $140mm and includes a $20mm PIPE, which more than meets the transaction's minimum cash condition. Customers Bank is expected to remain the largest investor in the combined company. The transaction is expected to close in Q4 2020.
  • Bloomberg reported that Canoo, an electric vehicle startup, is rumored to be in talks for a deal with Hennessy Capital Acquisition Corp. IV (HCAC) that would value the company at more than $2bn and raise approximately $300mm in new equity.
  • Bloomberg reported that Hims Inc., a telemedicine company that sells wellness and healthcare products, is in talks for a $2bn deal with Oaktree Acquisition Corp. (OAC) that would include a $100mm PIPE.


Charter Extensions

  • FPAC set a meeting date of 8/24/2020 to approve its transaction with Global Blue.
  • SPAQ extended its charter through 2/14/2021 with no sponsor contribution.
  • HCAC set an extension meeting date of 8/27/2020.
  • CFFA filed to extend its charter through 12/17/2020 with no sponsor contribution.

Upcoming Meetings and Deadlines
  • 8/16/2020 AGBA liquidation deadline (optional contribution extension)
  • 8/18/2020 PACQ HighPeak Energy approval meeting (liquidation deadline 8/21/2020)


Links

  • Here’s a CNBC interview with BowX Acquisition Corp. (BOWX) Chairman and Co-CEO Vivek Ranadivé.

  • Bloomberg writer Matt Levine published a column focusing on IPO alternatives and how uncertainty may keep driving operating companies towards SPACs.

Disclosures: Site administrators may maintain positions in various SPAC securities and may trade in or out of those securities at any time without notice. Information from spacresearch.com is provided for informational purposes only and should not be relied upon as the basis for any investment decision. Nothing on spacresearch.com is a recommendation or solicitation to buy or sell any investment.