GigCapital3, Inc. (GIK.U) Postpones IPO, SPAC IPO Market in Flux

GigCapital3, Inc. (GIK.U), which was originally anticipated to price yesterday evening, but got bumped to tonight, has now postponed their IPO indefinitely due to market conditions.  Today was an especially challenging day for SPAC IPOs with the last four SPACs to price trading significantly below their $10.00 issue price.  The SPAC tide is starting to turn and IPOs are getting stranded on a terms sand bar.

Last night’s pricings – Live Oak Acquisition Corp. (LOAK.U) and Sustainable Opportunities (SOAC.U) – closed today at $9.88 and $9.93, respectively. Monday’s IPO, Roth CH Acquisition I Co. (ROCHU) closed today at $9.94.  And Collective Growth (CGROU), which priced last week, closed at $9.90.

With results like this, it’s no surprise GigCapital3 has delayed their IPO since demand probably tanked in light of today’s trading activity. Investors were probably asking themselves, “why buy an IPO unit at $10.00 when you can buy in the open market below that?” And while offering better terms to investors could have been a solution to keeping this IPO on track to price, it would appear the terms were too steep for the Gig team to push forward.

However, (and this is a big however), the Social Capital Hedosophia SPACs seem to be doing just fine. IPOB.U and IPOC.U closed today at $10.24 and $10.15. Chinh Chu’s CC Neuberger Principal Holdings I, while above $10.00, but not appreciably, closed at $10.06. It would appear that the name-brand, elite teams, and most importantly, teams with SPAC experience, are the only SPACs currently able to IPO with a premium share price.  This was something that was speculated about a few weeks ago in the SPACInsider newsletter….that is, that the current environment is going to create a “survival of the fittest” scenario, where there is a lack of appetite for the tier-2 teams. Or at least there won’t be demand for those teams at the terms being offered.  The result being that the terms required to get an IPO done will be so expensive to a tier-2 team that they postpone indefinitely. What’s left will only be the strongest, most experienced teams that can command affordable terms.

We still have an additional six more SPACs on file to price and despite the recent flurry of SPAC IPOs, we might be looking at another pause to see what shakes out. This is not necessarily a bad thing.  The SPAC market could use a little air to digest the past three weeks and consider the current landscape before moving forward.  And again, as has been said before, the best salve for a SPAC market has always been good combinations.  If we can get one or two to announce GREAT deals (despite Covid), SPACs will be back to “game-on”.

Let’s see what develops.