Maybe Don't SPAC Me Daddy
Hope y’all had a fantastic weekend! Sorry for the delay in this week’s letter - I was on a plane to Amsterdam. But I am not going to let my jet lag keep me from writing to you (insert awww emoji). I watched “The Reunion” on the plane - a documentary capturing the 2018 charity match between Federer and Nadal that the Federer’s foundation hosted in South Africa, to honour his South African roots as his mother was born and raised there. They also invited the comedian Trevor Noah, (who is also half South African and half Swiss) to play in the doubles and apparently Noah, who had never even picked up a racquet in his life before, took 2 months of intense tennis coaching so that he could play at the event! It was the largest tennis event ever with 52,000 people in the audience. While I wasn’t there for that one, I am really hoping to attend the Laver Cup this fall in London where Federer and Nadal are teaming up again!!
I also watched “Homage”, which is another sports documentary show about the volatile mavericks of the sporting world. I watched the episode on John McEnroe and Andre Agassi, and it was hilarious! I had forgotten about the infamous Johnny Mac quote when he repeatedly yelled at the umpire - “You cannot be serious!”. His autobiography is also by the same name and that’s on my next to read list, along with Agassi’s Open. (Btw, Trevor Noah’s Born a Crime is another gem that I highly recommend.)
Ok enough about tennis and books! Let’s see what happened in our favourite SPAC sector this last week. The De-SPAC index was up 10.2% in the last week, leading all the other indices by a huge margin. But on the flip side, it continues to trail by a huge margin on the LTM basis, down a nasty 62.7%.
On the issuance side, the slowdown continues. There have been 27 SPAC IPOs in the first 5 weeks of the year vs 121 last year, and despite all of them being issued with better terms, the median price remains below NAV at $9.76. They do have an overfunded trust of 102%, 15 months acquisition period, and 50% warrant coverage on average.
In terms of redemptions, for the last 25 deals that have closed recently, the median redemption has been 82% and they have experienced a median decline of 19% from their closing price (to the current price as of last Friday).
In terms of SPACs bowing out of the race, there were 3 that withdrew last week, and 17 YTD vs 9 for all of 2021.
For SPACs trying to grit it out and close the deal even when it means reducing the valuation, we had one taker last week. ECP Environmental’s merger with Fast Radius was initially valued at an EV of $995M, but was reduced by 24.6% to an adjusted EV of $750M to close the deal. Below is the list of the other recent SPACs that have taken the road once never taken.
For those who are still ways away from closing on the merger but want to remain on the path to close, they’ve offered additional backstops in the form of incremental PIPEs. Below is the list of the recent names on that list -
Lastly in terms of deal terminations, we have seen 3 SPAC deals fall apart YTD with Longview terminating their deal with HeartFlow most recently.
So yeah, maybe don’t SPAC me daddy…
That’s all from me for this week. I’m going to be in Amsterdam for the next couple of weeks, so for any folks out here, hit me up - would love to grab a coffee or a pint! For the rest, take it easy and have a great week ahead!