Side-by-Side Comparison of the Twelve Seas and LF Capital SPAC IPOs
Twelve Seas Prices an Upsized $180 Million IPO and LF Capital Prices $135 Million IPO
Last night, both Twelve Seas Investment Company and LF Capital Acquisition Corp. priced their initial public offerings and will begin trading today under the symbols TWLVU and LFACU, respectively.
Both SPACs were of a similar size (as of yesterday), but Twelve Seas did a surprise upsize to $180 million, whereas LF Capital raised $135 million in total gross proceeds. I thought it would interesting to see a side by side comparison of terms to demonstrate the differences in structure and why some SPACs are able to upsize their offerings. To be clear, an upsized offering does not mean one deal is better than the other. It does show investor interest or more specifically, institutional interest. However, quality of offering and investor interest are sometimes not aligned. Let’s take a look.
| Twelve Seas | LF Capital | |
|---|---|---|
| Sector Focus | Pan-Eurasian Region | Fintech |
| Initial Filing $mm | $100.0 | $135.0 |
| Last Amended S-1 $mm | $150.0 | $135.0 |
| Final Gross Proceeds Raised $mm | $180.0 | $135.0 |
| % Held in Trust / Per Unit | 100% / $10.00 | 102% / $10.20 |
| Backstop? | No | Yes |
| Anchor Investor? | No | Yes |
| Sponsor Private Placement | Units | Warrants |
| Shares | 1 | 1 |
| Warrants | 1 | 1 |
| Rights | 1 | 0 |
| # Months to Complete | 18 | 24 |
| Underwriters | EarlyBirdCapital / I-Bankers | B.Riley / Raymond James |
As you can see, the real difference between Twelve Seas and LF Capital comes down to three items:
- Unit structure: In addition to one Share and one Warrant, Twelve Seas is offering a Right. LF is not.
- Offering a Right in addition to the Share and Warrant means additional potential upside to unit holders. Another “free look”.
- Time horizon: Twelve Seas is offering a shorter time period to complete an acquisition (18 months vs. 24 months for LF Capital).
- As an investor, institutional or otherwise, a shorter time period means a faster return on investment.
- Backstop/Anchor Investor: Twelve Seas does not have a Backstop/Anchor Investor. LF has BlackRock Funds acting as Backstop/Anchor.
- Having a backstop and anchor means less negotiating power for institutions at the time of conversion/redemption. By virtually guaranteeing the combination will close, the SPAC has more leverage for determining the conversion/redemption price even if the announced transaction is a so-so to below average deal.
But here’s the real difference: All three of the above terms mean that as an investor, the terms are more favorable for Twelve Seas. BUT… if you’re a SPAC management team, LF Capital’s terms are slightly more favorable to the SPAC. Which is why LF had to put additional at-risk capital into the trust to bring the percentage up to 102% to get investors into the deal. To explain further, LF has an extra six month cushion for completing a transaction, they don’t have the added headache of a Right in their capital structure, AND they have a backstop investor to protect the cash in trust at closing.
So again, determining which structure is more appealing really depends on which side of the table you sit. Are you an investor or SPAC management? Luckily, as a SPAC, there are a number of different term-levers you can pull or push to get your SPAC where you and your investors need it to be. In the end, both of these two SPACs raised a good amount of capital and everybody wins. For now.
The clock just started ticking….
Congratulations to Twelve Seas and LF Capital.
Underwriters for Twelve Seas: EarlyBirdCapital Inc., I-Bankers Securities, Inc.
Underwriters for LF Capital: B. Riley FBR, Raymond James