“Gov’t Shutdown” SPACs: A Comparison of Terms

For lack of a better way to describe the SPACs we currently have on file to IPO, we’re going to call this group the “Government Shutdown SPACs.” This is due to the fact that six of the seven have had to remove their delaying amendments just so they can price in this crazy situation where the SEC has been furloughed indefinitely.  The lone holdout being Acamar Partners, since they only recently filed their initial S-1.  However, expect them to file without the delaying amendment any day now.

The six that have removed their delaying amendment in anticipation of pricing have been listed below in order of size, left to right. (Zoom in if it’s difficult to read)

The Deutsche Bank SPACS, RMG and Gores Metropoulos, are the easiest to address since they have nearly identical tier-1 structures.  However, you will notice RMG has added two additional terms to provide a little bit of extra confidence – the anchor investors and the Crescent Term.  The recent addition of BlackRock and Alta Fundamental Advisers as anchors helps, but this team is getting obscured in the formidable shadow of Gores Metropolous.  It’s like coming home and announcing you made honor roll only to have your big brother shout, “I got into Harvard!” ¯\_(ツ)_/¯  Hence, the additional terms.

Gores Metropoulos, on the other hand, could probably just skip the roadshow altogether if they wanted to and still be oversold.  It’s a Gores SPAC, which is arguably one of the most successful SPAC teams, and they’re pairing up with consumer legend Dean Metropoulos, so there are very high expectations for this deal.  Short of Dean running through midtown naked, this SPAC will have huge demand (and maybe even if he did).

On the other end of the spectrum, we have the smaller sized deals of Wealthbridge and Andina III, at $50 million and $100 million, respectively.  As is typical with many of the smaller deals, you see the addition of a right added to the unit and a shortened life. However, Wealthbridge has sweetened their terms by saying they have 12 months to complete a deal, but will add $0.10 per share to the trust for each of their three (3), three-month extensions.  So, if Wealthbridge needs to use the full 21 months, the trust will be $10.30 per share, without including interest earned. Andina III, however, is offering a full-warrant.

Nonetheless, the underwriters of Andina III (Cowen and Craig-Hallum) are participating in the private placement purchase of warrants to the tune of $1.25 million of the $3.75 million total.  That’s fully one-third of the at-risk capital and it means a substantial amount less skin in the game for the management team.  Plus, while Andina used the Crescent term in an effort to provide comfort to investors, they used a head-scratcher of a threshold by saying if they do a PIPE at business combination they’ll adjust the warrant strike but only if the PIPE is done at less than $8.50.  That’s not very comforting to investors. The strike will still be $3.00 out of the money at $8.50, or twice what it is at $10.00, which is $1.50.

This brings us to the two mid-range deals with very similar structures – Monocle and Pivotal, at $150 million and $200 million, respectively.  However, Pivotal has three major differences that give them the edge. First, Pivotal has a big forward purchase of $150 million, giving the team a potential $350 million of cash to use for an acquisition (assuming no redemptions) and at worst, at least $150 million if a significant number of investors redeem. So this combination is already getting done. Second, Pivotal’s at-risk capital is fully the responsibility of their management team, whereas Cowen is, again, participating in Monocle’s at-risk purchase for $833,333 of the total $5 million.  Third, Pivotal has a ton of prior SPAC experience thanks to their Chairman and CEO, Jonathan Ledecky, whereas Monocle does not.  As we’ve said before, SPAC experience counts.  Navigating a SPAC acquisition is tricky business and understanding the process is a big advantage.

So to recap, we can group these six SPACs fairly easily by size and structure – small, medium and large. In this simplified version, the smalls have a right in their unit and an abbreviated life.  The mediums, a full warrant (no right) and a life that is still less than 24 months.  And lastly, the larges, with 1/3 of a warrant and 24 months.  Gores Metropoulos and RMG both are tier-1 deals with with tier-1 underwriters and hence, look very attractive.  Looking at the mid-range group, Pivotal solidly has the edge due to the team’s experience and $150 million forward purchase. And finally, Wealthbridge takes it for the smaller size deals by utilizing three 3-month extensions for $0.10.

Things can still change and a resolution to the government shutdown could throw a monkey wrench into pricing schedules, but we’ve provided an anticipated schedule of pricings below, as it currently stands.

• Jan. 23rd (Wednesday) – Monocole Acquisition Corp.
• Jan. 24th (Thursday) – Andina Acquisition Corp. III
• Jan. 28th (Monday) – Gores Metropoulos, Inc.
• Jan. 31st (Thursday) – Pivotal Acquisition Corp.
• Feb. 4th (Monday) – Wealthbridge Acquisition Limited
• Feb. 5th (Tuesday) – RMG Acquisition Corp.