Wednesday evening, we had another new SPAC filing with InterPrivate Acquisition Corp., a $175 million IPO. This bring the total number of SPACs currently on file to IPO in 2020 to six, so we’re already 1/10th of the way there to breaking 2019’s record of 59 SPACs.
As for the name “InterPrivate”, that comes from Ahmed M. Fattouh, who will be Chairman and CEO of this SPAC, having been a Founder Member and the CEO of InterPrivate LLC, a private investment firm. InterPrivate LLC invests on behalf of a consortium of family offices in partnership with independent sponsors from leading private equity firms.
Mr. Fattouh will be joined by Alan Pinto, as Senior Vice President, who’s background includes Institutional Sales & Trading at Dahlman Rose & Co., as well as independently advising clients on capital raising and M&A. Brian Q. Pham, will also be a Senior Vice President, but his background is in Venture Capital, having previously been a Principal at at Sherpa Capital, a San Francisco based Venture firm, but has most recently been an independent investor and advisor to technology companies since 2017.
So while it’s become fashionable in the more recent SPACs to have a team that has previously (or currently) worked together in some capacity, these three have very different backgrounds. Brandon C. Bentley, who will be General Counsel and Director, is the lone exception. Mr. Bentley has worked with Mr. Fattouh at both InterPrivate and Landmark Value Investments, but not in a deal-making capacity. Rather, as General Counsel and/or Chief Operating Officer.
As for deal structure, EarlyBird really likes a 21 months duration. Of the last five IPOs that EarlyBird has book-run, four have had a life of 21 months. Interestingly, only one other SPAC still currently searching for a target has a 21 months life – Megalith Financial (MFAC), book-run by Chardan – and that’s only because they started at 24 months, but had to give a little on terms. Nonetheless, InterPrivate will also be a 21 months deal, along with 100% in trust and a 1/2 warrant. However, you will also notice that the warrant call trigger has been increased $0.50 to $18.50. The standard is currently $18.00 for a deal of this size so it appears they are conceding a smidge given that InterPrivate is already asking for a 1/2 warrant, are a first time team, and without a sector focus. However, it remains to be seen if $0.50 will be enough to get this deal done at these terms.
To sum up, the 1/2 warrant structure has become quite common as of late, but EarlyBird appears to be trying to get ahead of any pushback on InterPrivate’s 1/2 warrant by raising the warrant call trigger $0.50 to $18.50. Yet, the terms still feel like a bit of a reach. 18 months would have made this an easier sell, but the SPAC market is hot. Fear of missing out on a deal is real so while investors may want better terms, EarlyBird could probably still sell it anyway. Plus, even if everyone cuts back their indications, there are so many new investors to SPACs that it’s no longer as difficult to build a book. It’s a strange time to be an investor right now. But as we’ve seen before, the pendulum can swing pretty fast in either direction.
Summary of terms below:
EarlyBirdCapital is sole book-runner, I-Bankers Securities is co-manager.
Graubard Miller & Greenberg Traurig, LLP are issuer’s counsel and underwriter’s counsel, respectively.
Marcum LLP is auditor.