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December 7, 2020
Welcome to the SPAC Research weekly newsletter.

Day One Float Turnover
A long-running theme in SPACs goes something like this: SPAC IPO investors are mostly yield-focused and not typically interested in becoming long-term shareholders in SPAC target companies. To be successful, SPAC sponsors will have to move shares out of the hands of IPO investors and into the hands of fundamental investors who want to own the acquisition target. If they can't move enough shares, the SPAC arb funds that are still holding from IPO will mostly redeem for cash, depriving the newco of cash and a meaningful public float.

Back in June, we looked at the correlation between float turnover and trading performance for announced SPAC deals. We discovered that float turnover was heavily correlated with stock price for pending SPAC deals. But that study was six months ago, which feels like an eternity in SPAC world. Back then, the status quo was for most pending deals to languish below cash in trust at a modest risk-arb style yield.

If you look now, you'll see that 46 of 51 live SPAC deals are trading above trust. While sponsors still have to recycle most of the SPAC's float to have a successful deal closing, fundamental investors are paying more attention to SPACs now. And retail is too.

We've looked at factors correlated with SPAC success before. But it may be hard to find a stronger relationship with success than how much of a SPAC's float turned over on the day its deal was announced.
Omitted for visibility: QuantumScape (NYSE: QS), 378% traded; $42.50 stock price
There are successful deals that didn't move shares immediately. But every SPAC that traded more than 50% of its float on day one has a stock price above $10 now.

Anybody who's been paying attention for a while knows that 2020 is the first time SPACs have turned into momentum stocks. And as you can see below, 2020's class of deals is generating far more excitement than those in previous years, with much greater float rotation on deal announcement dates than ever before.
Omitted for visibility: QuantumScape (NYSE: QS), 9/3/2020 deal announcement, 378% float rotation
We've previously written about the correlation between larger SPAC trust accounts and more successful deals. But it's important not to confuse causation and correlation. We can't necessarily infer that bigger SPACs drive better results. It may just be that the principals who sponsor larger SPACs are both capable of raising larger vehicles and more likely to succeed.

All else being equal, it's possible that a smaller SPAC can produce better outcomes. Consider two SPACs, one that raised $200mm and one that raised $400mm. If a target is choosing between those two SPACs, they'll notice fairly quickly that the $200mm version comes with half the amount of dilution via promote shares (and via warrants on the cap table). But there's another hidden benefit. The $200mm SPAC only has to move 20 million shares out of SPAC arb hands before the entire public float is owned by participants interested in the target itself (rather than just being interested in beating their cost of capital over an 18-24 month period). And fundamental investors are much less likely to sell shares at 101% or 102% of cash in trust.

More and more SPACs are finding operating targets that are household names. You could view the world through an incredibly reductive lens that ignores operating fundamentals and only seeks to measure how much retail demand a deal generates. Companies that are well known to the public before deal announcement have a significant leg up in generating retail demand.

Unfortunately, our favorite proxy for retail ownership shut down back in August. But retail participation is obviously significant in many cases, as evidenced by recent examples of SPACs having to remind shareholders to vote at deal approval meetings. Hypothetically, a deal that can generate 5 million shares of retail interest will eat through a quarter of our $200mm SPAC's float above, but only an eighth of the $400mm SPAC's float.

It's not obvious that retail participation is a recipe for the long term success of a target company. But many SPAC outcomes appear path-dependent. For one, getting your share price over say $12 dramatically reduces the likelihood of public redemptions. But also, a SPAC's stock price shortly after deal closing can have a dramatic impact on its ability to raise money in follow-on offerings or to use shares as currency for strategic acquisitions.

Sponsors and investors alike would do well to pay attention to float turnover on deal announcement day. Market conditions right now are such that SPAC arb funds may not unilaterally dump their entire inventory of shares the moment a deal is announced. But we can use float turnover to approximate how much progress a SPAC has made toward generating momentum and attracting fundamental investors. And filtering the demand of household names through smaller float sizes can produce explosive results.

News From the Past Week

New S-1's
  • ScION Tech Growth I (SCOA) filed to raise $500mm for an acquisition in fintech. Chairman Andrea Pignataro is founder and CEO of ION Investment Group, a technology software investment company and an operator of global technology businesses. CEO Mathew Cestar was a managing director at Credit Suisse from 2005 to 2020, and served as co-head of EMEA investment banking for the firm from 2017 to 2019. The SPAC includes a forward purchase agreement worth between $100mm and $300mm with an affiliate of its sponsor. UBS and Citigroup are joint book-runners.
  • Corner Growth Acquisition Corp. (COOL) filed to raise $300mm for an acquisition in technology. CEO and Co-chair Marvin Tien is a general partner of Corner Ventures, a venture capital firm that invests in early-stage growth technology companies. Co-chair John Cadeddu is a general partner of Corner Ventures and co-founded its precedessor firm, DAG Ventures. Cadeddu sourced many of DAG's flagship investments including Ambarella (NASDAQ: AMBA), Bloom Energy (NYSE: BE), EventBride (NYSE: EB), FireEye (NASDAQ: FEYE), Grubhub (NYSE: GRUB), Yelp (NYSE: YELP) and Wealthfront, Inc. Cantor Fitzgerald is sole book-runner.

  • Golden Falcon Acquisition Corp. (GFX) filed to raise $250mm for an acquisition in TMT and fintech in Europe, Israel, the Middle East or North America. Chairman Scott Freidheim is founder and managing partner of Freidheim Capital LLC, an investment family office, and is the former CEO of CDI Corp. a publicly traded staffing and engineering company. CEO Makram Azar is the former chairman of banking for both the MENA and EMEA regions for Barclays Bank Plc. UBS and Moelis are joint book-runners.

  • MedTech Acquisition Corporation (MTAC) filed to raise $200mm for an acquisition in healthcare in the United States. Chairman Karim Karti worked at General Electric (NYSE: GE) for 22 years, most recently as president and CEO of the GE Healthcare Imaging division, before serving as COO of iRhythm Technologies, Inc. (Nasdaq: IRTC), a digital healthcare company. CEO Christopher Dewey is a managing director of Ceros Financial Services, Inc., an investment advisory firm, and was a founding board member of MAKO Surgical Corp., a robotic surgical company that was sold to Stryker (NYSE: SYK) for $1.65bn in 2013. CAO and Secretary Robert Weiss and CFO David Matlin served as secretary and director, respectively, of Matlin & Partners Acquisition Corp. (MPAC), which raised $330mm in March 2017 and acquired hydraulic fracking company U.S. Well Services (NASDAQ:USWS) in November 2018. Raymond James is sole book-runner.

  • Seven Oaks Acquisition Corp. (SVOK) filed to raise $200mm for an acquisition in ESG. CEO Gary Matthews served as CEO of Integrated Electrical Services (NASDAQ: IESC), an infrastructure service provider, for the past two years. CFO Andrew Pearson was managing director and global head of portfolio management for General Atlantic, a $40bn+ global growth equity firm. JonesTrading is sole book-runner.

  • Viveon Health Acquisition Corp. (VHAQ) filed to raise $170mm for an acquisition in healthcare in North America. CEO Jagi Gill has more than 20 years of healthcare investment and management experience with a focus on orthopedics. Chardan is sole book-runner.

  • Ventoux CCM Acquisition Corp. (VTAQ) filed to raise $150mm for an acquisition in hospitality, leisure, travel and dining in North America. Chairman and CEO Edward Scheetz founded King & Grove Hotels, which he rebranded as Chelsea Hotels and sold in 2016; prior to that, he served as CEO for Morgans Hotel Group (NASDAQ:MHGC), which he took public in 2006. Director Jonas Grossman has served as Chardan Capital Markets' head of capital markets since 2003 and has a long history in SPACs. Director Woodrow Levin serves as a director of 10X Capital Venture Acquisition Corp (VCVC), which raised $175mm in November 2020 and is seeking an acquisition in technology, and as a director of DraftKings Inc. (Nasdaq: DKNG) which was acquired by Diamond Eagle Acquisition Corp. (DEAC) earlier this year. Chardan is sole book-runner and co-sponsor of the SPAC.

  • Ackrell SPAC Partners I Co (ACKIT) filed to raise $100mm for an acquisition in fast-moving consumer goods. Chairman Michael Ackrell is the CEO of Ackrell Capital, a boutique investment bank providing M&A and capital raising services to the consumer, technology, digital and hemp industries. CEO Shannon Soqui is co-founder and CEO of Next Frontier Brands, a provider of fast-moving consumer goods with a focus on beverages and wellness. COO Stephen Cannon has been involved with a number of SPACs including Global SPAC Partners Co (GLSPT), which filed to raise $200mm for an acquisition in the MENA region in October 2020, Twelve Seas Investment Corp, which acquired Brooge Energy Limited (NASDAQ: BROG); CM Seven Star, which acquired Kaixin Auto Holdings (NASDAQ: KXIN); and DT Asia Acquisition Corp., which acquired China Direct Lending Corp. (OTC: CLDCF). The SPAC will feature a subunit structure that will award an extra half warrant to nonredeeming shareholders. EarlyBirdCapital is sole book-runner.

Deal News

  • Northern Genesis Acquisition Corp. (NGA) announced a deal to acquire The Lion Electric Company, a manufacturer of all-electric medium- and heavy-duty urban vehicles. The deal reflects an enterprise value of $1.5bn and includes a $200mm PIPE. The combined company will trade on the NYSE under the symbol "LEV.” No closing timeline has been given.

  • CF Finance Acquisition Corp. II (CFII) announced a deal to acquire View, Inc., a Silicon Valley-based smart window company whose last financing round secured $1.1bn from SoftBank's Vision fund in November 2018. The deal reflects an enterprise value of $1.6bn and includes a $300mm PIPE. The transaction is expected to close in Q1 2021.

  • Star Peak Energy Transition Corp. (STPK) announced a deal to acquire Stem, Inc., an AI-driven clean energy storage producer. The deal reflects an enterprise value of $829mm and includes a $225mm PIPE anchored by existing and new investors including funds managed by BlackRock, Van Eck Associates, and Adage Capital Management. The combined company will trade on the NYSE under the symbol “STEM,” with closing expected in Q1 2021.

  • Gores Metropoulos, Inc. (GMHI) closed its acquisition of Luminar on Wednesday 12/2/2020 with less than 1% of public shares exercising redemption rights. Ordinary shares and warrants are now trading on the NASDAQ as “LAZR” and “LAZRW.”

  • HL Acquisitions Corp. (HCCH) shareholders approved the company’s acquisition of Fusion Fuel at a meeting Friday 12/4/2020, with no public shares exercising redemption rights. Closing is expecting in the coming days, with the combined company to trade on the NASDAQ under the symbols “HTOO” and “HTOOW.”

  • Altimar Acquisition Corporation (ATAC) announced a non-binding LOI to combine Neuberger Berman's Dyal Capital Partners with Owl Rock Capital Partners in a merger of alternative asset managers.

  • Bloomberg reported that Collective Growth Corporation (CGRO) is in talks for a deal with Israeli Lidar startup Innoviz.

  • Far Peak Acquisition Corporation (FPAC) raised $550mm for an acquisition in fintech. Units contain one-third warrant coverage.

  • Capitol Investment Corp. V (CAP) raised $300mm without a specific sector focus. Units contain one-third warrant coverage.

  • Jaws Spitfire Acquisition Corporation (SPFR) raised $300mm in an upsized IPO for an acquisition in consumer technology and related businesses in North America and Europe. Units contain one-fourth warrant coverage.

  • Highland Transcend Partners I Corp. (HTPA) raised $275mm in an upsized IPO for an acquisition in disruptive commerce, digital media and services, and enterprise software, with a primary focus on North America and Europe. Units contain one-third warrant coverage.

  • Live Oak Acquisition Corp. II (LOKB) raised $220mm in an upsized IPO without a specified sector focus. Units contain one-third warrant coverage.

  • FinTech Acquisition Corp. V (FTCV) raised $218mm to acquire a business providing technological services to the financial services industry, with particular emphasis on data and payment processing. Units contain one-third warrant coverage.

  • PropTech Investment Corporation II (PTIC) raised $200mm in an upsized IPO for an acquisition in PropTech. Units contain one-third warrant coverage.

  • Rodgers Silicon Valley Acquisition Corp. (RSVA) raised $200mm for the acquisition of a Silicon Valley-based technology company with applications in the energy or industrial sectors. Units contain one-half warrant coverage.

  • Trepont Acquisition Corp I (TACA) raised $200mm for an acquisition in software, communications, artificial intelligence, machine learning, data, analytics, 5G, IoT, cloud, edge, security, services and related areas. Units contain one-half warrant coverage.

  • Seaport Global Acquisition Corp. (SGAM) raised $163mm to acquire a company emerging from a reorganization or distressed situation. Units contain three-fourths warrant coverage.

Charter Extensions
  • LACQ extended its charter through 6/30/2021 with no sponsor contribution to trust. Approximately $12.8mm remains in trust after redemptions.
  • TDAC extended its charter through 3/1/2021 with a $0.05 per share monthly contribution to trust and no further public shares exercising redemption rights.
  • THCB extended its charter through 4/30/2021 with no sponsor contribution to trust and less than 1% of public shares exercising redemption rights.
Upcoming Meetings and Deadlines
  • 12/8/2020 TZAC Reviva Pharmaceuticals approval meeting
  • 12/8/2020 TRNE Desktop Metal approval meeting
  • 12/8/2020 GIX Charter extension meeting (liquidation date 12/10/2020)
  • 12/8/2020 HYAC ARKO Holding approval meeting
  • 12/14/2020 LFAC Landsea Homes approval meeting (liquidation date 12/22/2020)
  • 12/15/2020 OPES BurgerFi approval meeting (outside date 10/31/2020)
  • 12/16/2020 FEAC Skillz Inc. approval meeting (outside date 12/31/2020)
  • 12/17/2020 SAMA Clever Leaves approval meeting (liquidation date 12/31/2020)
  • 12/17/2020 IPOB Opendoor approval meeting
  • 12/18/2020 LCA Golden Nugget Online Gaming approval meeting
  • 12/18/2020 BRPA Charter extension meeting (liquidation date 12/23/2020)
  • 12/18/2020 MFAC BankMobile approval meeting (outside date 11/25/2020)

  • Reuters reported that private equity firm Thoma Bravo is raising funds for a SPAC focused on software and technology.
  • Bloomberg reported that SPACs have trailed traditional IPOs when it comes to gender diversity on boards of directors.
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 is provided for informational purposes only and should not be relied upon as the basis for any investment decision. Nothing on is a recommendation or solicitation to buy or sell any investment.