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March 29, 2021
Welcome to the SPAC Research weekly newsletter.

Market Weakness
SPACs sold off across the board again last week. Despite a bounce after bottoming Thursday afternoon, the median yield on common equity without a deal rose to 1.66% by the end of the week, the highest it's been since early November. Lots of names with nearly two years remaining traded in the $9.50s and $9.60s this week, and nearly 75% of 2021's IPOs are trading below issue.
We took a snapshot of the yield curve on Wednesday 3/24 after the market closed and you can see that nearly every SPAC was in positive yield territory (and below trust). The curve has resumed a shape that looks more like historical norms as the market absorbed a slew of recent disappointing deal announcements.
The staggering drop in the SPAC Research Warrant Index also continued this week. Remember, the Warrant Index measures the market cap of public SPAC warrants without a deal announcement, divided by the initial trust account values for those SPACs. The trust account values are static, so the chart shows the price of the average warrant without a deal has fallen by more than 50% in a month.
But it's worth remembering that the numerator in the Warrant Index calculation is the market cap of public warrants. So over time, a reduction in warrant coverage at IPO issuance will result in a declining warrant index if everything else remains equal. That structural factor is part of what we're seeing as the hot 2021 SPAC market resulted in fewer warrants overall. Now that reduction is marking down the total warrant market cap as the IPOs from January and February separate their components for individual trading into a weak market.

You can see below that a two-year trend in declining warrant coverage may have bottomed earlier this month, but warrant coverage is still near historic lows.
Above, we looked at activity in SPACs without a deal. But what about the performance of SPACs with live business combinations?

When we looked a few weeks ago, despite market weakness, only 12 live deals were trading below trust. On our new listings pages, where we've added a number of relevant fields for each category of SPACs, you can see that more than one-third of all live deals are currently trading at a discount to trust. That brings back memories of the risk arb days in SPACs when many deals would trade for a merger arb-style discount to their anticipated closing date and likelihood of success. The move makes our prediction from two weeks ago that many SPACs may have to contend with redemptions again look fairly prescient.

More recent deals have struggled to gain traction in the market. You can see below that March's deal announcements are generally trading below those from December-February. It's hard to say if that reflects how long each deal has had to find fundamental investors in the market or a broader underlying trend in deal quality or valuations. But it seems likely that retail's enthusiasm for deal announcements has dampened since the much hyped Churchill IV (CCIV) deal for Lucid Motors was announced in late February.
We've been warning for weeks that it would take a meaningful return to positive yields to bring IPO issuance back in check. After a blistering first quarter that eclipsed the entirety of 2020 in SPAC fundraising, the pace of issuance finally appears to be slowing down. SPAC IPOs typically open for trade between Tuesday and Friday of each week (nobody prices IPOs over the weekend). If you look back at the recent calendar, March 26 was the first of those weekdays without a SPAC IPO in over two months!

Portfolio decisions are often made without watching the tape every single day. But eventually the street was going to notice that they were getting allocated a higher proportion of units requested than during February -- and that they could pick up shares in the secondary market on recent IPOs for 1-2% below issue price. That is exactly what you can see in the price chart below.
Demand for SPAC IPOs seems to lag trading conditions by a few weeks. And we've heard plenty of issuers say they're on hold for a week or so to absorb the adjustment in market conditions. But 248 SPACs have publicly filed an S-1 and many more are waiting in the queue behind those.

It seems likely that repeat sponsors with good deal history and those with great deal flow and access to capital will still be able to raise new vehicles. But so many teams have come to market in recent months that the low liquidation rate of recent years may change in 2022 when the current crop of IPOs starts facing deadlines.

It's hard to say how things like rising Treasury rates and inflation, and a rotation from growth into value would impact the SPAC market long term. But in the coming months, we'll be watching these macro themes as well as the fact that the SEC clearly has its eyes on SPACs.

News From the Past Week

Deal News

  • Thoma Bravo Advantage (TBA) announced a deal to acquire ironSource, a business platform for the app economy. The deal reflects an enterprise value of $10.3bn and includes a $1.3bn PIPE led by Thoma Bravo. The transaction is expected to close in Q2 2021.

  • BowX Acquisition Corp. (BOWX) announced a deal to acquire WeWork. The deal reflects an enterprise value of $9bn and includes an $800mm PIPE led by Insight Partners, Starwood Capital Group, and Fidelity Management & Research Company LLC. The transaction is expected to close in Q3 2021.

  • Jaws Spitfire Acquisition Corporation (SPFR) announced a deal to acquire Velo3D, Inc., an additive manufacturing company. The deal reflects an enterprise value of $1.6bn and includes a $155mm PIPE led by Baron Capital Group and Hedosophia. The transaction is expected to close in 2H 2021.

  • Spring Valley Acquisition Corp. (SVSV) announced a deal to acquire AeroFarms, a vertical farming corporation. The deal reflects an enterprise value of $1.1bn and includes a $125mm PIPE led by AeroFarms insiders, and Pearl Energy Investments (SVSV’s sponsor). The transaction is expected to close in Q2 2021.

  • Genesis Park Acquisition Corp. (GNPK) announced a deal to acquire Redwire, a provider of mission-critical space solutions and high reliability components for the next generation space economy. The deal reflects an enterprise value of $615mm and includes a $100mm PIPE led by Senvest Management, LLC and Crescent Park Management, L.P. The transaction is expected to close in Q2 2021.

  • Malacca Straits Acquisition Company Limited (MLAC) announced a deal to acquire Asia Vision Network, the holding company for Vision+, an Indonesian OTT media business and MNC Play, the third largest broadband and IPTV operator in Indonesia. The deal reflects an enterprise value of $573mm and is expected to close in late Q2 or early Q3 2021.

  • Chardan Healthcare Acquisition 2 Corp. (CHAQ) announced a deal to acquire Renovacor, Inc., an early-stage biotechnology company developing gene therapies for cardiovascular and central nervous system diseases resulting from gene dysfunction. The deal reflects an enterprise value of $84.6mm and includes a $30mm PIPE. The transaction is expected to close in Q2 2021.

  • Foley Trasimene Acquisition Corp. II (BFT) shareholders approved the company’s acquisition of Paysafe on Thursday 3/25/2021. Redemption statistics were not provided. Closing is expected to occur on Tuesday 3/30/2021. Ordinary shares begin trading on the NASDAQ on Wednesday 3/31/2021 under the symbol “PSFE.”

  • Newborn Acquisition Corp. (NBAC) closed its acquisition of Nuvve on Monday 3/22/2023. Ordinary shares and warrants are trading on the NASDAQ as “NVVE” and “NVVEW.”

  • CIIG Merger Corp. (CIIC) closed its acquisition of Arrival on Wednesday 3/24/2021 with less than 1% of public shares exercising redemption rights. Ordinary shares and warrants are trading on the NASDAQ as “ARVL” and “ARVLW.”

  • Replay Acquisition Corp. (RPLA) shareholders approved the company’s acquisition of Finance of America at a meeting Thursday 3/25/2021. Redemption statistics were not provided and no closing timeline has been given.

  • Bloomberg reported that D8 Holdings Corp. (DEH) is in talks to merge with Bill Gates-backed Vicarious Surgical.
  • Bloomberg reported that Roth CH Acquisition II Co (ROCC) is in talks to acquire music publisher Reservoir Media Management.
  • Sportico reported that Equinox Holdings, the majority owner of SoulCycle and luxury gym and fitness brand, is in discussions with as many as 12 SPACs for a public listing.
New S-1's
  • Horizon Acquisition Corporation III (HZNA) $500mm
  • Spartan Acquisition Corp. IV $400mm
  • Aperture Acquisition Corp (APCP) $350mm
  • Crucible Acquisition Corp. III (CRUB) $350mm
  • Artisan Acquisition Corp. (ARTA) $300mm
  • Ascendant Digital Acquisition Corp. II $300mm
  • Gateway Strategic Acquisition Co. (GCSA) $300mm
  • Hony Capital Acquisition Corp. (HCAA) $300mm
  • Jackson Acquisition Company (RJAC) $300mm
  • Jeneration Acquisition Corporation (JACA) $300mm
  • Project Energy Reimagined Acquisition Corp. (PEGR) $300mm
  • Andretti Acquisition Corp. (WNNR) $250mm
  • Concord Acquisition Corp II (CNDA) $250mm
  • Concord Acquisition Corp III (CNDB) $250mm
  • Falcon Acquisition Corp. $250mm
  • Lazard Fintech Acquisition Corp. I (LFTA) $250mm
  • Lazard Healthcare Acquisition Corp. I (LHCA) $250mm
  • Silverman Acquisition Corp. I (SACQ) $250mm
  • Swiftmerge Acquisition Corp. (IVCP) $250mm
  • Avanea Energy Acquisition Corp. (AVEA) $200mm
  • Category Leader Partner Corp 1 (CATL) $200mm
  • CEA Space Partners I Corp. (CEAS) $250mm
  • Crucible Acquisition Corp. II (CRUA) $200mm
  • Good Commerce Acquisition Corp $200mm
  • Hunt Companies Acquisition Corp. I (HTAQ) $200mm
  • Israel Amplify Program Corp. (ISAP) $200mm
  • Science Strategic Acquisition Corp. Bravo (SCIB) $200mm
  • Science Strategic Acquisition Corp. Charlie (SCIC) $125mm
  • Siddhi Acquisition Corp. (SDHI) $200mm
  • Mercury Ecommerce Acquisition Corp. (MEAC) $175mm
  • NewHold Investment Corp. II (NHLD) $175mm
  • Industrial Tech Acquisitions II, Inc. (ITAQ) $150mm
  • OS Acquisition Corp. (OSAA) $150mm
  • Venice Brands Acquisition Corp. I (VBAQ) $150mm
  • Parabellum Acquisition Corp. (PBRM) $125mm
  • Altamont Pharma Acquisition Corp (ALTP) $100mm
  • Modiv Acquistion Corp (MACS) $100mm

IPOs
  • Gores Guggenheim, Inc. (GGPI) raised $750mm for an acquisition in industrials, technology, telecommunications, media and entertainment, business services, healthcare, financial services and consumer products. Units contain one-fifth warrant coverage.
  • Khosla Ventures Acquisition Co. III (KVSC) raised $500mm for an acquisition in technology. KVSC trades as common stock with no warrant coverage.
  • Landcadia Holdings IV, Inc. (LCAH) raised $500mm for an acquisition in consumer, dining, hospitality, entertainment and gaming. Units contain one-fourth warrant coverage.
  • MSD Acquisition Corp (MSDA) raised $500mm for an acquisition in technology and media. Units contain one-fifth warrant coverage.
  • Dragoneer Growth Opportunities Corp. III (DGNU) raised $400mm for an acquisition in internet, media, consumer/retail, healthcare IT and financial services/fintech. DGNU trades as common stock with no warrant coverage.
  • Khosla Ventures Acquisition Co. II (KVSB) raised $400mm for an acquisition in technology. KVSB trades as common stock with no warrant coverage.
  • Decarbonization Plus Acquisition Corporation III (DCRC) raised $350mm for an acquisition in global decarbonization, including energy and agriculture, industrials, transportation and commercial and residential. Units contain one-third warrant coverage.
  • NextGen Acquisition Corp. II (NGCA) raised $350mm for an acquisition in industrial, technology and healthcare. Units contain one-fifth warrant coverage.
  • Virgin Group Acquisition Corp. II (VGII) raised $350mm for an acquisition in the consumer sector. Units contain one-fifth warrant coverage.
  • Lead Edge Growth Opportunities (LEGA) raised $300mm without a specific sector focus. Units contain one-fourth warrant coverage.
  • ArcLight Clean Transition Corp. II (ACTD) raised $275mm for an acquisition in renewable energy. Units contain one-fifth warrant coverage.
  • Disruptive Acquisition Corp I (DISA) raised $250mm for an acquisition in the health and wellness, entertainment and consumer-facing technology sectors. Units contain one-third warrant coverage.
  • Rocket Internet Growth Opportunities Corp. (RKTA) raised $250mm for an acquisition in technology. Units contain one-fourth warrant coverage.
  • Supernova Partners Acquisition Company III, Ltd. (STRE) raised $250mm for an acquisition in technology, with a focus on internet, consumer, media and similar businesses. Units contain one-fourth warrant coverage.
  • Corazon Capital V838 Monoceros Corp (CRZN) raised $200mm for an acquisition of a business in consumer-facing technology, subscription or recurring revenue models, marketplaces and networks, or that operates in sectors such as education, social media and dating, and ecommerce. Units contain one-third warrant coverage.
  • Glass Houses Acquisition Corp. (GLHA) raised $200mm for an acquisition of a business that provides critical resources and/or services to the technologies powering the 21st century industrial economy. Units contain one-half warrant coverage.
  • Magnum Opus Acquisition Limited (OPA) raised $200mm for an acquisition in global consumer, technology or media sectors with disruptive growth potential through the use of technology that can benefit from operations in Asia. Units contain one-half warrant coverage.
  • TB SA Acquisition Corp (TBSA) raised $200mm for an acquisition in South Africa and Sub-Saharan Africa. Units contain one-third warrant coverage.
  • Northern Genesis Acquisition Corp. III (NGC) raised $150mm without a specific sector focus. Units contain one-fourth warrant coverage.
  • Newbury Street Acquisition Corporation (NBST) raised $120mm for an acquisition in consumer internet or media. Units contain one-half warrant coverage.

Upcoming Meetings and Deadlines
  • 3/31/2021 CGRO Innoviz Technologies approval meeting
  • 4/1/2021 NPA AST SpaceMobile approval meeting
  • 4/8/2021 RPLA Liquidation deadline

Links

  • Reuters reported that the SEC has opened an inquiry into SPACs and how bankers are managing the risks involved.
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.