Last week, PTK Acquisition Corp. (PTK.U) filed for a $100 million IPO. The focus of this first time SPAC will be “businesses operating in the United States in the high-tech industry”. PTK has assembled a deep bench of management talent that includes former executives with extensive experience in hardware, venture capital and private equity, led by Peter Kuo. The Sponsor, PTK Holdings LLC, is a holding company jointly owned by the founders.
The industry focus provided by PTK is two-fold; corporate and institutional information technology markets, and consumer gaming, esports, and entertainment markets. Both are meaningful segments of economy with robust growth rates. On the corporate side, an estimated $884 billion of the $3.9 trillion global annual IT expenditure in 2020 will be in the hardware-focused category of devices and data centers, a category PTK should have a significant competitive advantage in. Future drivers of growth in this category are sensors for buildings, transportation networks, power grids and autonomous vehicles. In fact, the market for technology and products related to autonomous vehicles alone is estimated to increase from $54 billion in 2019 to $556 billion in 2026, at a CAGR of 39.5%.
On the consumer side, the TAM is smaller than corporate, but 2018 saw the global games market record $137.9 billion in revenue, exceeding both the global cinema market of $41.1 billion and the global recorded music market of $19.1 billion combined. This is driven by gaming hardware and systems, global esports, and digital entertainment. The “gaming peripherals” segment, which consists of laptops, high-precision gaming mice, customizable keyboards, and console controllers, is on pace to expand to $3.6 billion annually by 2021 – a 9.9% CAGR.
With the engineering focused market segments PKT desires to compete in, you’d hope to see the rest of the management team have applicable backgrounds. Luckily in this case, the management team has technical experience in spades. Peter Kuo, the CEO, co-founded Canyon Bridge Capital Partners, a tech focused private equity firm with expertise in cross border deals between the US and China. Recently Canyon Bridge bought the UK based semiconductor company Imagination Technologies Group. Kuo is a thought leader on US/China business relations and will bring this expertise to PTK.
Timothy Chen, the CFO, has held the position of CEO of VIA China, the world’s largest independent manufacturer of motherboard chipsets. Ker Zhang, the Secretary, has been an entrepreneur in residence at Kleiner Perkins as well as the CEO of VIA Telecom until it was acquired by Intel Corporation in 2015. John Hui, a Director, has previously served as Chief Strategy Officer of Foxconn. Lastly, Charles Huang, a Director, Co-founded Blue Goji Corp, a maker of games and controllers, and was co-developer of the blockbuster game Guitar Hero.
The terms of the offering reflect the fact that this is a new SPAC team searching for a deal in areas of the market some investors won’t like. Hardware valuation multiples are lower than software valuation multiples, and the North American esports market is still a fraction of the size of the esports market in the Asia Pacific region. That being said, the 1 full warrant convertible to 3/4 of one share for each unit should help motivate investors. This SPAC should price the last week of June.
Summary of terms below: