A $1.0 Billion 1/4 Warrant SPAC IPO means we’re in uncharted territory now.

Today’s $1.0 billion IPO of Churchill Capital Corp. III (CCXX.U) is stunning for a number of reasons, but if investors need further evidence of a rapidly changing SPAC landscape…look no further.  That’s because despite being the largest SPAC to ever price, after two, $200 million upsizes, and (annecdotally) VERY meager allocations to traditional SPAC investors, Churchill III still managed to come out of the gate roaring to a $10.59 share price.

Admittedly, the bankers and the Churchill team made it look easy, but that is exactly what makes today’s IPO so significant.  By all counts and measures, it is generally difficult to sell an IPO.  It’s is even more difficult to sell a big IPO.  And it should be VERY difficult to sell a big SPAC IPO with a 1/4 warrant. Especially since historically, SPAC shareholder bases have primarily been comprised of what we like to call “traditional SPAC investors”.  The term “traditional SPAC investor” is a bit of a catch-all phrase, since it can include arb investors, but also investors that aren’t strictly “arb”, but will occasionally hold through a vote, or investors that are more focused on the warrants, and so on.  However, all are generally shorter-term investors rather than the long-only crowd.   However, after checking with a few very experienced “traditional” SPAC investors this morning, all echoed the same refrain regarding Churchill’s IPO….very small allocations. That means the majority of the $1.0 BILLION worth of Churchill shares were sold to new(ish) SPAC investors.  And yet, there was still an incredible amount of demand for CCXX.U shares, so much so that it opened at $10.59.

So to review, Churchill III initially filed for a $600 million IPO, but subsequently was able to upsize $400 million, or 67% of initially offering size, indicating a huge book, many times over-sold.  Additionally, Churchill III is the largest SPAC ever priced, it is only the third SPAC to price with a 1/4 warrant (Flying Eagle on file makes it four), and Churchill already broken the day-one opening price by beating Gores IV’s $10.52.  However, Churchill III also has the potential to break the record for the day-one unit close price, also currently held by Gores IV, at $10.40.

Today’s developments mean we’re a lot closer that we previously thought to scenarios such as under-funded trusts or SPACs without warrants at all, just shares. It also means that the 1/10 warrant that was initially included in Churchill III’s draft registration statement, was clearly achievable.  Having said that, there aren’t that many teams of Churchill’s caliber that can include a 1/10 warrant in it’s unit.  But I would bet good money that the Flying Eagle team is watching today’s events with a particularly keen interest and contemplating their next amendment to their S-1….

As stated above…we’re in uncharted territory now.