Wednesday evening, we had a new SPAC IPO filing in the form of the $225 million Tortoise Acquisition Corp. Tortoise is being led by Vincent Cubbage, as CEO, President and Chairman of the Board of Directors. Most recently, Mr. Cubbage was the former CEO of Lightfoot Capital Partners GP LLC, and is currently a Managing Director, Private Energy, of Tortoise Capital Advisors, L.L.C., since January 2019.
This is an interesting SPAC for a number of reasons, but first and foremost is the fact that Barclays is on the cover as a new entrant in the SPAC underwriting game. Plus, Barclays decided to debut with Goldman Sachs and UBS as its joint bookrunners (however, Barclays is still left lead). That’s a solid line-up of tier-1 banks, but will Barclays need to lean on Goldman and UBS as a SPAC newbie? Remains to be seen…SPACs are harder than they look.
Regardless, this SPAC’s structure has a few bells and whistles to boot, but let’s start with the basics. First off, this is a 100% in trust, 24 months deal, but with 1/2 warrant in its unit, not 1/3. Plus, Tortoise has added the option of calling the warrants for shares at $10.00. This feature is typically seen (so far) in tier-1 SPACs and means that while the company can call the warrants post-combination for cash or cashless exercise at $18.00, they can also call them for redemption for shares at $10.00 or greater. The amount of shares an investor will receive in the call for shares scenario is based on a black scholes model that has calculated the fair market value based on the time and price at which they are called. We’ve discussed the merits of this term before and you can read about that here.
Additionally, you will also see the appearance of the Crescent Term once again and just like in the Deutsche Bank deals of RMG and DiamondPeak, Tortoise is using a threshold of $9.20 before they will reset the warrant strike in the event of a PIPE done below $10.00 at combination. The use of $9.20, rather than $9.50 (seen in Megalith, EdTechX, etc.) appears to be a way of distinguishing the tier-1 deals from the rest of the pack. In the parlance of the sub-35 year old crowd, “you can’t sit with us”.
Lastly, Tortoise has added a forward purchase agreement for $150 million from Atlas Point Energy Infrastructure Fund, LLC (“Atlas Point Energy”), but there is an added twist. Typically, a forward purchase agreement is done at $10.00 per unit. However, in Tortoise’s forward purchase, the SPAC team has the option of allowing Atlas Point Energy to purchase either units at $10.00 or just shares at $9.67 – the choice is at Tortoise’s discretion at the time of the business combination. Generally, post-unit split of a SPAC IPO of this structure, $9.67 is where the share would trade anyway, but the optionality for management to decide which they would like Atlas to purchase is a nice feature.
All told, this is a pretty good structure and the 1/2 warrant feels appropriate and sell-able. Plus, the Crescent Term and $150 million Forward Purchase add a little gravy to this meal. It’s all about the roadshow now and how the team performs.
Summary of terms below:
Barclays Capital Inc., Goldman Sachs & Co. LLC and UBS Securities LLC are joint book-running managers.
Vinson & Elkins L.L.P. and Skadden, Arps, Slate, Meagher & Flom LLP are issuer’s counsel and underwriter’s counsel, respectively.