Expected to Price Thursday, May 14th

Novus Capital Corp. (NOVSU), filed an amended S-1 late this morning revising its terms ahead of an anticipated May 14th pricing. This is in keeping with all of the other recent IPOs that have amended terms, which as you can see below, all but Live Oak (LOAK.U) have made changes to their deal structures.

As for Novus Capital’s changes, this deal is now reflecting a 3/4 warrant (up from a 1/2) and 21 months (originally 24 months). Additionally, the table that was put together for a recent post on SPAC term changes has been updated to give a better sense of where terms are stacking up. (note:  if a term has been changed, it has been highlighted in blue).

As you can see, of the nine SPACs to price since the Covid-19 crisis, all have changed one or more terms, except Live Oak Acquisition Corp. (LOAK.U).  Live Oak is also the SPAC with the lowest current unit price (intra-day price).

Regarding Novus Capital, their 21 months is in keeping with the rest of EarlyBird’s deals, which frequently use a 21-months duration.  It’s an “EarlyBird Special”. And the 3/4 warrant is similar to GigCapital3’s change.  If Novus Capital does price this week, the first day unit price will be a good indicator of how investors feel about the recent changes to deal terms.  If Novus breaks issue price, the rest of the SPACs on file to IPO might need to make further changes to their deals as well.

But why does price performance matter you ask?

Well, because most investors are probably looking at the opening performances of Roth CH, Live Oak, and Collective Growth and wondering if they should pass on buying at $10.00 in the IPO when they can buy the next day in the open market for $9.90. Or at least whittle down their indications so they can leave room to buy it below $10.00.  Those kinds of IPO performances make it much more difficult to sell future IPOs in general, if investors feel like they got screwed  So while a bank might be able to stomach that kind of a first-day performance for one deal, it ultimately hurts the selling process for their other IPOs waiting in queue to price. If it becomes a trend, investors start to expect an IPO to break issue. Eventually, the IPO market shuts because not enough investors want to participate at $10.00.

Remember, it’s not easy getting enough orders to fill a book, and it’s especially not easy if you start to see investors cut back their indications.  So finding terms that satisfy investors is a real balancing act, but the real balancing act is making sure investors want to participate in not just today’s IPO, but tomorrow’s and next week’s.  And the best way to do that is to make sure there are better opportunities in the IPO market rather than the secondary market.

Revised Summary of terms below: