Longview Acquisition Corp. (LGVW.U), filed for a $300 million SPAC IPO Friday evening, in what has been a bumper crop month for SPAC IPOs. Longview, which will be focusing on acquisition targets in a broad range of industries, will be sponsored by Glenview Capital Management, the investment firm run by Larry Robbins, who will also be this SPAC’s Chairman.
Larry Robbins, is the Founder, Portfolio Manager and CEO of Glenview, which prior to the Covid-19 outbreak, managed over $6.0 billion in assets. However, that amount looks like it will be updated in the prospectus since it’s currently left blank. Many funds have recently taken a hit, thanks to Covid, and Glenview most likely has too since they were heavily invested in healthcare stocks. Healthcare facilities have been forced to forego higher paying elective procedure in favor of treating Covid patients, which has significantly impacted their bottom lines. As for why Glenview’s AUM is important and is being mentioned here, it ties in to Longview’s Forward Purchase Agreement, but we’ll revisit that mechanism a little bit further down below.
As for the rest of the team, Mr. Robbins will be joined by John Rodin, as CEO and Director, and Mark Horowitz, as CFO. Mr. Rodin is currently a Partner and Co-President of Glenview, having rejoined the firm after briefly leaving to be President of Fantex Brokerage Services, a start-up that allowed investors to trade securities tied to the cash flows of professional athletes and their brand contracts. Which, frankly, sounds pretty interesting. Mr. Horowitz is also a partner and the other Co-President of Glenview. So this is solidly an “All-Glenview” team.
Looking at the terms, this SPAC has top notch terms for a first time team – 24 months, 1/3 of a warrant, and the ability to call their warrants for shares at $10.00 (in addition to the standard $18.00 for cash or cashless exercise). However, the only teams that have been able to command a 1/3 warrant in a Covid world (so far) have been high profile and with solid prior SPAC experience – Chamath Palihapitiya’s Social Capital Hedosophia II (IPOB.U) & III (IPOC.U), Chinh Chu’s CC Neuberger (PCPL.U) and Fortress Value Acquisition Corp. (FVAC.U). Jaws Acquisition Corp. (JAWS.U), is also a first time team with a 1/3 warrant and has nearly the exact same terms as Longview. Longview, however, has the added benefit of a Forward Purchase Agreement.
That big, chunky Forward Purchase Agreement (FPA) at $150 million with Glenview, certainly provides extra comfort to targets. However, you will notice additional language in the prospectus that allows that $150 million amount to change based on Glenview’s size. To wit:
“….provided that, if the value of 5.0% of the aggregate net asset value of such funds is less than $150,000,000, the funds will only be obligated to purchase shares (at $10.00 per share) for an aggregate purchase price equal to 5.0% of such aggregate net asset value…“
What this means is, if at the time of the purchase of the FPA, if Glenview’s Net Asset Value is less than $3 billion, the total amount of the FPA gets adjusted down ($150 million = 5% of $3 billion). For example, if Glenview’s net asset value falls to $2.5 billion, the FPA will be adjusted to $125 million, rather than $150 million. Again, this goes back to the beginning of this post where we discussed how in the current environment many funds have taken big hits thanks to Covid. So whereas Glenview may have previously been around $6 billion+ in size, it sounds like they are contingency planning in case that number gets closer to $3 billion. It’s important to note that the FPA will always be done at $10.00 per unit, it’s just the total size of the FPA that will be adjusted. It also explains why the Longview Prospectus currently has blank spaces for Glenview’s AUM.
All things considered, will this SPAC sell at substantially the same terms as Social Capital Hedosophia II & III, or CC Neuberger, despite this being a first time team? And further to that, investors will need to decide if this team is on par with Jaws Acquisition Corp. I suspect there will be pushback regardless, but both Jaws and Longview will be a very good litmus tests for terms. If investors bite and more importantly, if these deals trade well day-one, the whole category will re-adjust terms upwards. If either struggles to sell and breaks issue price, there are going to have to be more adjustments for teams getting ready to file. Both of these deals will be important to watch closely.
Look for this SPAC to price the week prior to Memorial Day.
Summary of terms below: