B. Riley Principal Merger Corp. II (BMRG.U), filed their follow-up $200 million SPAC last Thursday, April 23rd, in a week that officially marked that SPACs were back in business.  Once the IPO machine gets cranking, it hits top speed pretty quickly, so expect to see more deals get filed shortly.  However, looking at B. Riley II, as compared to B. Riley I, their second SPAC is a near carbon copy of the original.  So if you liked the first one, you’ll probably like this one too.

As for the team, all of the players are exactly the same for this go-around, but with a little re-shuffling of positions.  Daniel Shribman, who was the CFO and Director of the first SPAC, is now in the driver’s seat as CEO, CFO and Director for B. Riley II.  Kenneth Young, who was previously the CEO and Director, will now only be a Director. And Bryant Riley (THE “B. Riley”), will take a larger position, as the Chairman, whereas before, he only held the title of Director.

However, if you look at the DRS (Draft Registration Statement), which was filed on March 2, 2020, Ken Young was originally slated to be CEO with Dan Shribman as CFO.  So it appears in a post-Covid world, their positions needed to be adjusted and probably because if you look at Ken Young’s bio, it appears he’s got a lot on his plate. Thanks to a pandemic and the economy being a mess. That’s because, in addition to being President of B. Riley, Ken Young is also currently CEO of Babcock & Wilcox (NYSE: BW), which focuses on energy and environmental technologies and services for the power and industrial markets.  Regardless, Dan Shribman should slot right in to the CEO role comfortably.  He is currently the Chief Investment Officer of B. Riley Financial (Nasdaq: RILY) and has been President of B. Riley Principal Investments, LLC, since September 2018. And Ken Young is still on the team, it’s just the label, or title, that’s different.

As for the terms, B. Riley II looks substantially similar to B. Riley I.  Both had units that included a 1/2 warrant and a $25 million forward purchase agreement (units at $10.00), with Crescent Terms at $9.20.  However, whereas their first SPAC was $125 million in size, this time they are asking for $200 million. Additionally, instead of 18 months, B. Riley II, would now like 24 months. So do the terms fit? A few considerations…

On the positive side, B. Riley I, managed to announce a deal with Alta Equipment Group (ALTG) within eight months of IPO date and closed the transaction three months later. From IPO to combination closing in less than one year is a quick timeline.  Also, the stock traded as high as $10.80 and this SPAC only had 7.3% of shareholders redeem at the combination vote.  That’s a pretty good result for a first time team.  However, the Alta deal closed in mid-February, but since then, ALTG’s share price fell off a cliff, like many companies in a Covid world (Alta is a provider of industrial and construction equipment – not much of that happening right now).  So it’s hard to say where this company “could” have traded if we weren’t in a pandemic.  However, it still didn’t have the eye-popping share prices like we’ve seen with other combinations, like Virgin Galactic or DraftKings.  Finally, the current terms in the S-1 are exactly the same as were filed in the DRS, which was filed pre-Covid.  So there has been no adjustment to terms to take into account the new reality.

All told, while many SPACs are amending terms by adjusting warrants, a 1/2 warrant for B. Riley II feels appropriate since they are a team with SPAC experience, and good experience to boot.  Where they may have to come down is on that 24 months and revert back to 18 months.  If they could get their first deal done in 11 months, investors may push back and ask them to give on that.

Look for B. Riley II to price mid-May.

Summary of terms below: