Last night, while everyone was still recovering from the Christmas holiday, another new SPAC was filed making the forthcoming 2019 IPO count SIX. This latest SPAC is Pivotal Acquisition Corp., a $200 million IPO being led by none other than Jonathan Ledecky, one of the more prolific SPAC issuers, circa 2005 to 2009, setting the template for serial SPAC issuers such as the Gores and Fintech teams.
For those unfamiliar with SPAC history, Jonathan Ledecky led Endeavor Acquisition, a 2005 SPAC that subsequently combined with American Apparel for approximately $395 million and at that time, it was pretty big news. Whatever you may think of American Apparel now, it was a hot company in the mid-2000’s and having a SPAC (!) acquire the company made headlines. In fact, Endeavor and Services Acquisition (which bought Jamba Juice) were part of the wave of 2005 SPACs that made investors sit up and take notice and created huge demand for the SPAC product.
Mr. Ledecky went on to lead two more SPACs in quick succession – Victory Acquisition Corp. ($330 million) and Triplecrown Acquisition Corp. ($552 million). However, timing is everything and the financial crisis brought the SPAC market to a grinding halt (as well as pretty much everything else). Victory never got to make an acquisition and as with so many of the 2007 SPACs, had to liquidate. Triplecrown combined in 2009 with Cullen Agricultural Technologies, a dairy and agricultural company – also not great timing. If you were around in that era, it was a real bloodbath in SPACland.
But here we are in 2019, and Mr. Ledecky is back. So let’s take a look at the terms of his new deal:
Looking at the terms, the structure feels appropriate. Could they have been more aggressive and gone with a 1/2 warrant or maybe 24 months? Yeah. But the SPAC road has been bumpy as of late and we’ve had a number of deals execute poorly (IAM, STLR, DOTA), so investors aren’t going to be very agreeable. With that thought in mind, it’s a little dangerous for teams right now to be aggressive and these terms look to be a concession to the current mood.
Lastly, the Sponsors have built in a sizeable forward purchase of $150 million, which sets up the team nicely for negotiations with targets. At a minimum, they will have $150 million in cash to work with.
We’ll watch for any changes as subsequent amendments get filed. Stay tuned.
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