In this series we’ll be examining successful SPAC deals from the past both in the terms and circumstances of their de-SPAC processes and how they have weathered the storms that have followed after their public listings with research from SPACInsider contributor Anthony Sozzi.

Thirty months does not sound like that long, but it’s been a lifetime as far as SPACs go.

At that point in time, the lock-down boom had begun with 36 fresh SPACs IPOing in the first half of the 2020. But, it was still unclear where the cycle would head. It was within the realm of possibility that the year would see just a slight uptick from 2019’s 59 SPAC IPOs.

It was into that environment that Fortress Value Acquisition Corporation announced its $1 billion combination with rare earth mineral miner MP Materials on July 15, 2020. The SPAC immediately shot up on the news. Quickly, the market reaction began to mirror that of DraftKings (NASDAQ:DKNG), which had closed its combination with Diamond Eagle three months earlier.

As we covered in our look-back at that deal, the reception of the DraftKings transaction was among the first indications that retail enthusiasm could be a major factor in SPAC transactions. But, DraftKings is an e-sports and digital gambling company, so it was a safe bet that there was some overlap between those playing stocks and fantasy sports outcomes.

But, here was a mining company getting nearly the same reception. Diamond Eagle closed the two-month anniversary of its announcement with DraftKings at $16.64, while Fortress Value hit the same milestone at $15.34. Diamond Eagle see-sawed downward on its three-month anniversary to $11.80, but Fortress Value maintained more of its momentum at this point, closing at $14.00 when it hit that mark. But, MP Materials was not your typical “monetary-stimulus” story.

This performance was not completely out of the blue, however. For one, MP Materials stood to be a truly unique trading opportunity once public. It owns the Mountain Pass mine in California, which is the only rare earth mining and processing site of scale in North America.

One of the site’s main products is refined neodymium-praseodymium (NdPr), which is the primary material used in the high-strength permanent magnets that power traction motors inside electric vehicles, wind turbines, drones and a wide variety of robotics. China controls about 80% of the world’s NdPr market, so MP Materials’ supply was near certain to be in high demand, particularly for national security applications like missile guidance systems as well as night vision and sonar arrays.

MP Materials also cut the sort of financial profile going into the deal that would be appreciated in any market environment. At announcement, it expected to finish the year with $30 million in EBITDA from $100 million in revenue for a very simple margin calculation. It would beat these estimates in the end with $42 million in adjusted EBITDA from $134 million in total sales for 2020, roughly 40% and 34% higher than expected, respectively.

There was plenty to value in the transaction itself as well. Fortress Value arranged a $200 million PIPE at $10 per share with participation from Slate Path Capital, Chamath Palihapitiya and Omega Family Office. The team also aligned its interests to the target company’s success to an unusually high degree.

Fortress Value made its entire 8,625,000-share promote contingent upon hitting earnout targets at $12, $14 and $16 and offered company shareholders an even larger earnout of 12,860,000 shares vesting at the slightly higher thresholds of $18 and $20 (spoiler alert: all would be hit).

The SPAC also took the uncommon step of agreeing to exchange all 5,933,333 of its private placement warrants into 890,000 shares at close at ratio of 0.15 shares per warrant. At Fortress Value’s pre-announcement share price, this equaled about $1.56 per warrant, which was a slight premium to where the warrants were trading at the time. But, this was to become a massive discount based on where the trading would lead.

As such, Fortress Value’s sponsor – though perhaps not expecting the market appreciation to be so sudden – proactively removed its portion of MP Material’s warrant overhang from the get-go. When MP Materials did ultimately call its warrants on a cashless basis in May 2021, public warrant holders received 0.3808 shares per warrant.

Despite these positives, Fortress Value’s performance still did not match the truly eye-watering market reaction to fellow green energy target Nikola (NASDAQ:NKLA), whose SPAC partner VectorIQ hit its zenith one month before Fortress Value announced at $73.50. Time would tell that this was largely for the best and MP Materials wound up neither overpromising nor underdelivering.

Fortress Value and MP Materials closed the transaction on November 17, 2020 with the SPAC’s share price at $14.39 and the combined company took off from there. One month later, it closed at $28.23 and by mid-February it was trading in the $40s. Even a secondary offering of 6,000,000 shares at $35 per share in March 2021 barely dented the stock price with the company closing just 8% below the offering price at $32.00 about a month later.

Despite the warrant conversion and a further secondary offering of 4,250,000 shares in September, the company closed out trading for the year at $45.42 on December 31, 2021.

This performance was backed by results, as MP Materials followed up its 2020 earnings beat by nearly doubling its 2021 revenue estimates at the time of the deal announcement and more than doubling EBITDA. The Fortress Value/MP Materials investor deck had the company turning $82 million in EBITDA and $171 million in revenue in 2021, but it instead generated a whopping $219 million in EBITDA from $331.9 million in revenue that year.

The company’s underestimation of its trajectory has continued with it beating its predicted full year 2022 revenue by 24% and EBITDA by 93% already in the first nine reported months of 2022. In April 2022, it broke ground on a Texas facility that would move it further down the finished goods value chain.

Once completed, the factory is expected to produce alloys and magnets for GM’s (NYSE:GM) vehicles, providing a domestic supply to support production for about 500,000 EV motors per year.

However, it remains to be seen whether MP Materials will remain a one-hit wonder for the Fortress Value team, led by Joshua Pack, Andrew McKnight and Daniel Bass – all of which also serve as executives at the SPACs’ private backer Fortress Investment Group. The team’s second deal – a play to de-lever clinic network ATI Physical Therapy (NYSE:ATIP) ahead of the post-pandemic re-opening – did not pan out as planned.

So, for now, the team’s track record remains a tale of two cities with MP Materials last closing at $30.47 and ATI at $0.48. Fortress would IPO three more SPAC vehicles in 2021, but liquidated all three over the past three months.

The deal has seen few imitators as well, most likely due to fact that the rareness of such targets are a major part of their appeal. The first attempt to recapture the same lightning in a bottle came with Sustainable Opportunities Acquisition Corp.’s $2.4 billon combination the The Metals Company (NYSE:TMC), which announced in March 2021 and closed in September of that year.

But, it sought to collect rare earth materials from the ocean floor in remote areas of the Pacific and still had some proving to do on the feasibility side. A much closer analogue to MP Materials, is Critical Metals, which announced a combination with Sizzle Acquisition Corp. (NASDAQ:SZZL) in October 2022.

It is developing a greenfield lithium mine in Austria, and although it is at an earlier stage of development than MP, it brings similar advantages of rare resources located in a positive geography with eager offtakers. The deal nonetheless has still not roused the market the same way MP did earlier in the cycle. Sizzle last closed at $10.35, even with its trust value, as it aims to close the deal in the first half of 2023.