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April 26, 2021
Welcome to the SPAC Research weekly newsletter.

Where Is The SPAC Market?
There's no question enthusiasm for SPACs has waned since the peak of exuberance in mid-February. The market has softened and investors are no longer scooping up anything they can find just because it has the word "SPAC" attached. And almost no IPOs have priced for two weeks due to the SEC's adjustment to how warrants should be treated. But deals are still getting done and our favorite barometer for sentiment, the median yield on pre-deal SPACs, has remained relatively stable over the past couple weeks.
There was a moment at the end of March when more than half of this year's IPOs were trading below issue. But you can see below that's no longer the case.
With recent IPOs are trading above $10, it suggests investors are likely ready to allocate again once the warrants-as-liability situation is settled. And rumor has it that bankers are preparing to resume issuance in early May. On the other hand, the small group of April IPOs mostly came from SPACs with either premium sponsorship or overfunded trust accounts. And the large (and still-growing) queue will likely struggle to clear without revising terms.

But despite some optimism returning on the front end, the reception for newly announced business combinations feels very different from back in February. EV deals don't pop straight to $15 anymore and approximately half of all live deals are trading at a discount to trust.

Last year's deal announcements are still trading fairly well. But fewer than 20% of this year's announced deals (in darker blue, below) are trading above $11, and only CCIV/Lucid Motors is above $20. Do recent deals just need more time to find committed shareholders? Or are investors done buying deals just because they're attached to a SPAC?
One thing we know is that public investors take many cues from the PIPE commitments attached to deals. If name-brand fundamental investors have committed significant capital to a transaction, many others will piggyback off their diligence and find it easier to push the buy button.

All market participants seem to acknowledge the PIPE market has gotten much tighter as enthusiasm has cooled. We plotted all the PIPEs over the past 15 months below to try and get a sense of what the market is doing.
You can see there were generally fewer PIPEs being committed in April, and in smaller amounts. We added up the totals by month to highlight the difference between April and previous months.
It feels even more dramatic when you consider that Altimeter and Grab's record-setting $3.5bn PIPE represented approximately two-thirds of this month's total to date. And what we can't see in the data is how many PIPEs are being marketed right now but struggling to close. There are hundreds more SPACs out there than there were six months ago, each working their own deal. How many PIPEs are being shopped for deal valuations that were agreed to a month ago? It was a lot easier to sell a $10 PIPE back in February when many common shares were already trading at $11 and enthusiasm was over the top. At this point, deals have a taller wall to climb and are being forced to stand on their own merit.

Below, we put together one more look at the PIPE market. We like to compare committed capital at deal announcement against a given deal's minimum cash condition. If the cash condition is fully met with PIPE commitments, then transaction risk is likely fairly low. And if the cash condition is mostly unmet, the SPAC will likely depend on holding onto most of its trust account.
When you see a deal announced with, say, a $200mm minimum cash condition and a $300mm PIPE (a 150% coverage ratio), often that means demand for the PIPE was so high that the parties decided to upsize. Q1 of this year saw lots of deals with a coverage ratio in excess of 100%. But you can see there are a lot fewer dots above that threshold than there used to be, indicating lesser demand overall.

Still, PIPEs are getting done. And it's probably healthy for the market to get more selective after a period of massive enthusiasm. But it will take time to see if deals struck during the hard times eventually perform better than those made when securing capital commitments was easier.

News From the Past Week

Deal News

  • Horizon Acquisition Corporation (HZAC) announced a deal to acquire Vivid Seats, a North American independent marketplace for tickets to live sports, concerts and theater events. The deal reflects an enterprise value of $2.1bn and includes a $225mm PIPE with 80% of capital committed by the SPAC's sponsor, Eldridge Industries, which also agreed to backstop the entire trust account. The transaction is expected to close in 2H 2021.

  • Fifth Wall Acquisition Corp. I (FWAA) announced a deal to acquire SmartRent, an enterprise smart home technology platform for property managers and residents. The deal reflects an enterprise value of $1.7bn and includes a $155mm PIPE led by Starwood Capital Group, Lennar and Invitation Homes. The transaction is expected to close in Q3 2021.

  • Roman DBDR Tech Acquisition Corp. (DBDR) announced a deal to acquire CompoSecure Holdings, a provider of premium financial payment cards and of cryptocurrency storage and security solutions. The deal reflects an enterprise value of $1.2bn and includes a $175mm PIPE led by BlackRock and Highbridge Capital Management. The transaction is expected to close in Q3 2021.

  • dMY Technology Group, Inc. II (DMYD) closed its acquisition of Genius Sports on Tuesday 4/20/2021 with less than 1% of public shares exercising redemption rights. Ordinary shares and warrants are now trading on the NYSE as “GENI” and “GENI/WS.”

  • GigCapital3, Inc. (GIK) shareholders approved the company’s acquisition of Lightning eMotors at a meeting Wednesday 4/21/2021 with 29% of public shareholders exercising redemption rights. No closing timeline was given. Ordinary shares and warrants are expected to trade on the NYSE as “ZEV” and “ZEV/WS.”

  • Northern Genesis Acquisition Corp. (NGA) shareholders approved the company’s acquisition of Lion Electric at a meeting Friday 4/23/2021. No redemption statistics were provided and closing is pending customary conditions as well as clearance from the AMF regulatory oversight body for Québec's financial sector. Ordinary shares will trade on the NYSE and TSX as "LEV" and warrants will trade on the NYSE and TSX as "LEV/WS" and "LEV.WT," respectively.

  • Reuters reported that SVF Investment Corp. 3 (SVFC) is in talks with Mapbox, a location data services provider.

New S-1's
  • None

Charter Extensions
  • Union Acquisition Corp. II (LATN) extended its charter through 10/22/2021 with no sponsor contribution to trust. Approximately $136mm remains in the SPAC’s trust account after 32% redemptions.

  • Tuscan Holdings Corp. II (THCA) extended its charter through 9/30/2021 with no sponsor contribution to trust. Approximately $149mm remains in the SPAC’s trust account after 14% redemptions.

  • Big Rock Partners Acquisition Corp. (BRPA) extended its charter through 5/24/2021 with no sponsor contribution to trust. Approximately $6mm remains in trust after 330 shares exercised redemption rights.

Upcoming Meetings and Deadlines
  • 4/26/2021 ALAC liquidation deadline (pending 4/23/2021 extension meeting results)
  • 4/27/2021 STPK Stem, Inc approval meeting
  • 4/28/2021 THCB Charter extension meeting (liquidation deadline 4/30/2021)
  • 4/29/2021 VSPR HydraFacial approval meeting
  • 5/5/2021 EXPC Blade approval meeting
  • 5/6/2021 SRAC Charter extension meeting (liquidation deadline 5/12/2021)
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.