And it’s the fourth SPAC to file with a 1/4 warrant…
Tonight we finally got the answer we’ve all been waiting for….what are the Eagle guys going to name their sixth SPAC? We’ve already had a Global Eagle, a Silver Eagle, Double Eagle, Platinum Eagle and a Diamond Eagle. What’s better than Diamond Eagle? Flying Eagle, apparently. Kinda sounds like something Biden would say (“I don’t give a Flying Eagle! Get off my lawn!“). SPAC names aside, Flying Eagle is the fourth SPAC to debut with a 1/4 warrant, solidifying that changes are indeed afoot. We’re in a new paradigm and it’s not so much “Peak SPAC” anymore as it is “metamorphisis SPAC”. But first, let’s review the team.
Flying Eagle will be led by Harry Sloan, as CEO and Chairman, having previously been part of Diamond Eagle’s sponsor group, with Jeff Sagansky included in the sponsor group for Flying Eagle. Interestingly, Jeff Sagansky was Diamond Eagle’s CEO and Chairman, and Harry Sloan was part of the sponsor group. So it seems they’ve flip flopped roles for this go-around. However, both Jeff Sagansky and Harry Sloan have been the “team” for all the Eagles, but Harry has not officially led a SPAC since Silver Eagle, which IPO’d back in July of 2013. Nonetheless, both Mr. Sloan and Mr. Sagansky are currently enjoying the success of Diamond Eagle’s announced combination with DraftKings, which to say has been “well-received”, would be an understatement. Diamond Eagle (DEAC) closed today at $16.82, a stunning price for a SPAC that hasn’t even closed its combination yet. Additionally, Eli Baker is back as President, CFO and Secretary, the same roles he holds in Diamond Eagle.
As for this SPACs structure, it’s a $500 million, 100% in trust, 24 months, 1/4 warrant SPAC, and very similar to Churchill III’s structure in that both do not include the Crescent Term. Plus, both can also remove interest from the trust to fund their working capital. In Flying Eagle’s case, they can remove a total of $1,000,000 of interest over the life of the SPAC, not per-year, whereas Churchill III can remove $1,000,000 per year. Additionally, Churchill III has 24 months, but can extend for three additional months if they have a signed LOI or definitive agreement on file, whereas Flying Eagle is a straight 24 months. So Flying Eagle’s terms are a slight notch below Churchill III’s, but both are in the upper echelons of SPAC structures, joining Conyers Park II and Gores IV, to form the elite, new guard. Or as traditional SPAC investors like to call them, the Four Horsemen of the SPAC-apocalypse. This is a tough structure if you’re an Arb investor.
Also noteworthy, Goldman Sachs is underwriting this deal and they are on the cover solo. Deutsche Bank, which has been on the cover of all five previous Eagle deals and book-ran the previous four, was not included on Flying Eagle. Maybe they’ll be added later, but their absence is currently noted.
In summary, as was discussed previously in other posts, as SPACs continue to announce stellar combinations and attract a different class of investors, the structures have evolved to be more private-equity friendly. The 1/4 warrant SPAC is here and here to stay. What seemed like an anomaly over the summer when it was debuted with Conyers Park II, has become the norm for elite teams now. More importantly, the 1/2 warrant structure that was so common throughout 2019 for first-time teams, is probably going to ratchet up to 1/3 of a warrant now. Not everyone, but when you consider that the last deal to price with a 1/3 warrant was September 2019’s Experience Investment Corp (EXPC), there’s room for some differentiation now that the bar has been raised. However, keep in mind that SPAC terms are very fluid. They can change very quickly, so what holds today could look very different 2-3 months from now. For those of us who have seen a number of these cycles, we know that ebbs follow flows. For now though, we’re in a pretty big flow.
Look for Flying Eagle to price late in the last week of February.
Summary of terms below: