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October 26, 2020
Welcome to the SPAC Research weekly newsletter.

Yields and Issuance
It's been a couple of months since we last highlighted the estimated SPAC yield curve. The SPAC market was extremely hot in July but common equity generally sold off in August to a median yield of 1.09%. Remarkably, that's right around where we're trading now. In fact, the current estimated yield curve looks an awful lot like it did two months ago, with a handful of SPACs trading at negative yields but the majority sitting between 1-2%.
The market has been volatile in the meantime. September saw a number of exciting deal announcements, with a handful whose shares traded into the teens on day one. Investors responded by bidding up common equity across the board for much of the month. But October has featured a number of lukewarm deal announcements and the speculative interest for common shares without a deal has cooled.

Below you can see a chart of the median estimated yield on SPAC common equity since the beginning of the year, which we'll use as a proxy for how cheap or expensive SPAC common equity is at a given moment. We started taking a daily reading of the median estimated yield back in late August (previous readings were only taken sporadically).
Let's zoom in on the past two months -- the portion highlighted in red on the chart above.
You could view September's rally in SPACs through the lens of speculative interest on upcoming deals, which is why we highlighted the three transaction announcements on the chart above. Each of them likely had an impact on supply and demand for the remaining universe of common shares without an announced deal.

But since mid-September, transaction reception has been tepid. Perhaps it's hopelessly reductive to ignore deal fundamentals and filter only by date, but it's hard to overlook the fact that just two of October's 15 deal announcements are trading above $11.
Well-received deals are only one piece of the equation, and 2020 has seen more than its fair share of exciting deals.

On the supply side however, new issuance has dwarfed previous years. Each of the last four months has seen over $10bn put into SPAC trust accounts and October has tallied over $14bn ith a week still to go.
If you're looking for an explanation of why SPACs have sold off, yields have moved up, and IPOs seem more challenging, look no further than the mountain of paper that keeps coming to market. Many new investors have come into SPACs in 2020 but at a certain point bankers are going to have a hard time selling new issues if they can't open new accounts at the same rate as earlier in the year. By all accounts, SPAC arb funds are carrying about as much inventory as they can handle.

There have been 88 SPAC IPOs over the past two months and 50 of those are trading at or below their IPO price. Eventually the market will notice if it can pick up half of all new issues at a discount to the initial offering price, which is part of why at least 20 SPACs have downsized or amended their terms in the past couple weeks. Repeat sponsors and those affiliated with large pools of capital have been able to hold firm on terms, but many first-time sponsors have been forced to overfund their trust accounts or increase warrant coverage.
The market is cyclical, and investor demand was present to meet elevated issuance throughout most of Q2 and Q3. It's too soon to tell if the IPO pipeline will start to clear a bit now that teams are past the moment where they could feasibly file an S-1 and come to market before November's presidential election. But if this week was any indication, the flood has slowed to a trickle. Only four new deals were filed last week, a stark contrast to much of this fall when we were seeing four new SPACs a day. Hopefully the market finds a balance into next year with a steady flow of deals that's proportional to what gets completed on the deSPAC side.
New S-1's

  • TS Innovation Acquisitions Corp. (TSIA) filed to raise $300 for an acquisition in proptech. TSIA is led by Robert Speyer, president and CEO of Tishman Speyer, a global real estate investment firm. BofA and Allen & Company are joint book-runners.

  • Concord Acquisition Corp (CND) filed to raise $250mm for an acquisition in financial services and fintech. CND is chaired by Bob Diamond, former CEO of multinational investment bank and financial services company Barclays. Diamond is also a founding partner and CEO of Atlas Merchant Capital, an alternative asset manager with over $1bn in assets under management. Cowen is sole book-runner.

  • FinTech Acquisition Corp. V (TFVU) filed to raise $215mm to acquire a business providing technological services to the financial services industry, with particular emphasis on data and payment processing. TFVU is the latest in the series of FinTech Acquisition Corps and brings back Betsy Cohen as chairman, Daniel Cohen as CEO, and James McEntee as president. See here for a full history of the Fintech Acquisition SPAC franchise. Cantor Fitzgerald is sole book-runner.

  • Zanite Acquisition Corp. (ZNTE) filed to raise $200mm for an acquisition in aviation, aerospace and defense, urban mobility and emerging technology. Steven Rosen and Kenneth Ricci are co-CEOs. Rosen has been co-CEO of Resilience Capital Partners, a private equity firm, since 2001. Ricci is a principal of Directional Aviation Capital which owns a number of aviation enterprises, including Flexjet, Sentient Jet and PrivateFly. BTIG is sole book-runner.


Deal News

  • South Mountain Merger Corp. (SMMC) announced a deal to acquire Billtrust, a leader in B2B order-to-cash solutions. The deal reflects an enterprise value of $1.3bn and includes a $200mm PIPE led by Fidelity Management & Research, Franklin Templeton and Wellington Management. The transaction is expected to close in early 2021.

  • Panacea Acquisition Corp. (PANA) announced a deal to acquire Nuvation Bio Inc., a biopharmaceutical company focused on revolutionizing cancer treatment by discovering, developing and delivering therapies that tackle some of the greatest needs in oncology. The deal reflects an enterprise value of 1.3bn and includes a $500mm PIPE led by EcoR1 Capital which is both PANA's sponsor and an existing Nuvation Bio investor. The transaction is expected to close in Q1 2021.
  • Acamar Partners Acquisition Corp. (ACAM) announced a deal to acquire CarLotz, Inc., one of the largest privately held used vehicle retail disruptors with the industry’s only consignment-to-retail sales platform. The deal reflects an enterprise value of $827mm (0.88x 2022 estimated revenue) and includes a $125mm PIPE. Existing CarLotz shareholders will retain 59% of the combined company’s pro forma equity. The transaction is expected to close in Q4 2020.

  • Longevity Acquisition Corporation (LOAC) announced a deal to acquire 4D pharma (AIM: DDDD), a London-listed developer of Live Biotherapeutics Products (LBPs). The deal includes a minimum cash condition of $14.6mm and a backstop commitment of the same amount from investors including LOAC's sponsor.

  • DiamondPeak Holdings Corp. (DPHC) closed its acquisition of Lordstown Motors on 10/23/2020. Ordinary shares and warrants are now trading on the NASDAQ as “RIDE” and “RIDEW.”

IPOs

  • Horizon Acquisition Corporation II (HZON) raised $500mm for an acquisition in media and entertainment. Units contain one-third warrant coverage.

  • Supernova Partners Acquisition Company, (SPNV) raised $350mm without a specific sector focus. Units contain one-third warrant coverage.

  • H.I.G. Acquisition Corp. (HIGA) raised $325mm in a downsized IPO without a specific sector focus. Units contain one-third warrant coverage.

  • DPCM Capital, Inc. (XPOA) raised $300mm in an upsized IPO for an acquisition in technology. Units contain one-third warrant coverage.

  • Altimar Acquisition Corporation (ATAC) raised $250mm in a downsized IPO for an acquisition in TMT. Units contain one-third warrant coverage.

  • Cerberus Telecom Acquisition Corp. (CTAC) raised $250mm in a downsized IPO for an acquisition in information and communications technology. Units contain one-third warrant coverage.

  • Tekkorp Digital Acquisition Corp. (TEKK) raised $250mm in a downsized IPO for an acquisition in digital media, sports, and entertainment. Units contain one-half warrant coverage.

  • Acies Acquisition Corp. (ACAC) raised $200mm in a downsized IPO for an acquisition in the live, location-based and mobile experiential entertainment industries. Units contain one-third warrant coverage.

  • Decarbonization Plus Acquisition Corporation (DCRB) raised $200mm in a downsized IPO for an acquisition in global decarbonization. Units contain one-half warrant coverage.

  • Lefteris Acquisition Corp. (LFTR) raised $200mm in a downsized IPO for an acquisition in fintech, with an emphasis on disrupting traditional financial services businesses. Units contain one-third warrant coverage.

  • Rice Acquisition Corp. (RICE) raised $215mm in an upsized IPO for an acquisition in energy transition or sustainability. Units contain one-half warrant coverage.

  • Sarissa Capital Acquisition Corp. (SRSA) raised $175mm for an acquisition in healthcare. Units contain one-third warrant coverage.

  • Good Works Acquisition Corp. (GWAC) raised $150mm for the acquisition of a distressed company. Units contain one-half warrant coverage.

  • BCLS Acquisition Corp. (BLSA) raised $125mm for an acquisition in healthcare. BLSA is listed as common stock with no warrant coverage.

  • Yellowstone Acquisition Company (YSAC) raised $125 in a downsized IPO for an acquisition in homebuilding, financial services and commercial real estate. Units contain one-half warrant coverage.

  • Eucrates Biomedical Acquisition Corp. (EUCR) raised $100mm for an acquisition in healthcare in North America and Europe. Units contain one-third warrant coverage.

  • Helix Acquisition Corp. (HLXA) raised $100mm for an acquisition in healthcare and related industries. HLXA is listed as common stock with no warrant coverage.

Upcoming Meetings and Deadlines
  • 10/26/2020 ALAC Charter extension meeting (liquidation deadline 10/26/2020)
  • 10/26/2020 ARYB Cerevel Therapeutics approval meeting
  • 10/27/2020 CPAA Advantage Solutions approval meeting
  • 10/28/2020 ANDA Charter extension meeting (liquidation deadline 10/31/2020)
  • 10/28/2020 SPAQ Fisker approval meeting
  • 10/30/2020 HCCO SOC Telemed approval meeting
  • 11/3/2020 CFFA GCM Grosvenor approval meeting
  • 11/4/2020 MNCL AerSale approval meeting (liquidation deadline 11/11/2020)
  • 11/5/2020 TOTA Charter extension meeting (liquidation deadline 11/6/2020)
  • 11/5/2020 KBLM 180 Life Sciences approval meeting (liquidation deadline 11/9/2020)
  • BMRG set a date of 11/12/2020 to approve its transaction with Eos Energy Storage.
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