Muddy Waters, the infamous short seller, has put out a new note on Multiplan, the Churchill Capital Corp. III combination company.  Clearly, when Muddy Waters writes about a company, they’re not singing hosannas and sending chocolates and flowers. No, it’s more like a ring-and-run with a package on your doorstep that you’d really rather not step in.

The long and the “short” of their report is a short thesis based on UnitedHealthcare’s competing product, Naviguard. The problem with Naviguard is, it has the potential to steal away a big chunk of Multiplan’s business by the end of 2022, which Muddy Waters estimates will amount to a decrease of 35% in 2022 estimated revenue and a decrease in levered free cash flow of 80%.  Those are heady numbers if realized.

Keep in mind, however, that Muddy Waters is an infamous short seller and their reports tend to move markets in a big way and usually to their advantage. Nonetheless, Hindenburg Research, another short seller, was the first to uncover inconsistencies in Nikola, so it’s important to pay attention to what these institutions write.

However, the bigger picture for Michael Klein and the Churchill Capital Corp. franchise is…what does this mean for Churchill Capital Corp. V (CCV)?  If you recall, Churchill V originally debuted with a new(ish) term where they would only be holding 90% of funds in trust with the other 10% held in escrow and not to be contributed to trust unless at least 85% of shareholders opted to redeem.  That term was subsequently removed due to strong investor pushback, and as a response, Churchill V curiously upsized from $300 million to $400 million and added three new bookrunners – Goldman Sachs, J.P. Morgan and BofA. B. Riley was also added as a co-manager.  And yet, CCV has yet to IPO despite initially filing on September 22nd.

In the larger scheme of things, today’s report means investors are most likely going to be pushing back even further on terms.  CCV currently wants a 1/4 warrant, but in light of today’s news, in addition to the poor trading performance of CCX (Churchill II announced a combination with Skillsoft), and the fact that Churchill IV is still out searching (and has a competing 1/5 warrant), AND it’s a very difficult SPAC terms environment to begin with, means CCV is most likely DOA at its current structure.

The best possible scenario for the Churchill team is that Michael Klein announces a GREAT combination for Churchill IV, as a counterpoint to all the current news, which will give some breathing room to terms for Churchill V.  However, without any such news, even a 1/3 warrant right now would be challenging.  There are simply too many good, competing SPACs fighting for a (currently) limited pool of investor dollars.  And you’re only as good as your last deal….

However, sometimes some friction or adversity is a good thing. And everyone loves a comeback.  Victor Hugo once said, “Adversity makes men. Prosperity makes monsters.”  Let’s see if today’s adversity results in a whopper of a combo for Churchill IV.