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October 28, 2019
Welcome to the SPAC Research weekly newsletter.

Tracking Closed SPAC Deals
Two weeks ago, we looked at all closed SPAC deals since 2016 and we observed a strong relationship between the size of a SPAC at IPO and the amount of equity a SPAC was able to sell at deal closing. We also saw that there's a relationship between how much equity a SPAC is able to sell at deal closing and its current stock price.

But readers who have been here for a while know that we view current stock price as an incomplete measure of post-combination performance. And now that we've been through all the closed SPAC deals back to 2016, we can compare them based on how much the equity sold at closing has appreciated or depreciated since then.

As before, unredeemed public shares are considered sold at the remaining value of the SPAC's trust account at closing. We'll start with the top five:
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It's an impressive group. We tried to keep the graphic as simple as possible, but for those interested in the underlying calculations, you can click on the table. For an example: Double Eagle (EAGL) closed its acquisition of Williams Scotsman with a $418mm PIPE and $288mm remaining in trust, for a total of $706mm of equity sold at closing. Those shares have a present value of $1,142mm (at approximately $15.80 per share), or an increase of $436mm.

Now for the bottom five:
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Notice anything in common here? Three of the five most value destructive SPAC deals since 2016 have come from the energy sector (and another one is energy adjacent). Alta Mesa, which recently filed for Chapter 11 bankruptcy, is at the bottom of the list. But even Riverstone Holdings' first SPAC (Silver Run I), one of the most successful SPACs ever on the front end, hasn't escaped the carnage in the energy sector over the past couple of years.

In fact, energy SPACs have lost over $3bn in value from their equity sold at closing since the beginning of this study. Aggregate results by sector are below.
Of course, those results are more useful with the context of how much capital was actually invested in each sector at deal closings over the same period.
Putting the two charts above together, we can also look at the percentage change in value that each sector has experienced since closing.
Across the 62 closed SPAC deals since 2016, approximately $17bn worth of common stock has been sold at closing. Those shares are worth $14.5bn today, a decline of $2.5bn (15.1%). But energy SPACs represent a loss of $3.3bn since closing, meaning closed deals across the rest of the SPAC universe are actually up more than $750mm (a gain of 6.6%).

That 6.6% gain ex-energy is not objectively inspiring when compared to the performance of the S&P500 since 2016. But remember, almost all SPAC deals are small-cap companies. Small-caps have lagged large-caps of late and are almost flat over the past couple years. And most investors are aware of the how poorly energy assets have performed over the focus period.

So what is the point here? With the caveat that nothing on SPAC Research is investment advice, our observation is that post-closing SPACs are not automatically the shareholder value incineration device that some financial journalists and market commentators would have us believe. And while it's worth remembering that front end returns (pre-closing of business combination) are more important to most day-one SPAC investors, there need to be value accretive deals for the SPAC engine to keep turning.

One last note: we want to mention again that this study ignores the value of seller rollover and sponsor equity because it's challenging to pick a measurable starting point for both of those quantities. (Rollover equity is usually just pegged to $10 and the sponsor promote isn't directly purchased for cash.) It's also worth pointing out that much of the seller and sponsor equity from more recent deals is still subject to transfer restrictions, which may have a trailing impact on the results of this study going forward.

Future posts will dive into more specific comparisons of individual SPAC outcomes against a sector benchmark.

News From the Past Week
IPOs and S-1's
  • GreenVision Acquisition Corp. filed to raise $50mm for an acquisition in Asia or North America with a focus on life sciences and healthcare. GreenVision will be led by CEO Zhigeng (David) Fu, a Chinese M&A lawyer with experience in private equity, venture capital and cross-border investment transactions. GreenVision's CFO, Qi (Karl) Ye, has managed over $5bn in AUM and is the founder of Mill River Investment Co., a private Chinese venture capital fund. I-Bankers is sole book-runner.
  • Amplitude Healthcare Acquisition Corporation (AMHC) filed to raise $100mm for an acquisition in healthcare. AMHC will be led by Howard Hoffen and Bala Venkataraman as Chairman and CEO, respectively. Hoffen is the founder of Metalmark Capital, a middle-market, growth oriented private investment firm, and was previously CEO of Morgan Stanley Capital Partners and Morgan Stanley Private Equity. Venkataraman is the founder of Avego Healthcare Capital, a healthcare-only, captive investment firm with $300mm of committed capital from its principals and more than $1.5bn in value created in this decade. BMO Capital Markets and SVB Leerink are joint book-runners.
  • Software Acquisition Group Inc. (SAQN) filed to raise $125mm for an acquisition in software. SAQN will be led by Jonathan Huberman, a tech executive with experience as CEO of numerous public and private enterprise software companies. Huberman also held a senior role in technology at The Gores Group, the private equity firm founded by serial SPAC sponsor Alec Gores. B. Riley is sole book-runner.
Deal Closing
  • Social Capital Hedosophia Holdings (IPOA) closed the company's acquisition of Virgin Galactic on Friday 10/25/2019 (though the results are not included in our study above because no redemption count is available yet). The combined company will trade on the NYSE under the symbol "SPCE" on Monday 10/28/2019. Given the reception that this deal has received, we would be surprised if Social Capital II doesn't file shortly, and it wouldn't be shocking to see a Social Capital sequel make a run at being the second ever SPAC offering with only 1/4 warrant coverage in each unit.
  • Chardan Healthcare Acquisition Corp. (CHAC) shareholders approved the company's acquisition of BiomX Ltd. at a meeting on Wednesday 10/23/2019. The transaction is expected to close on Monday 10/28/2019. No redemption count was provided.
  • Greenland Acquisition Corp. (GLAC) held a shareholder meeting Thursday 10/24/2019 to approve the company's acquisition of Zhongchai Holding Limited. The company lost a $5mm subscription agreement earlier in the week but still managed to close its combination the day of the meeting. Shares will trade under the symbol "GTEC" on Monday 10/28/2019. No redemption count was provided.
Approval Meeting Scheduled
  • Trinity Merger Corp. (TMCX) set a date of 11/12/2019 for the special meetings of stockholders and warrantholders to approve the company's business combination with the Broadmark real estate companies. The company also announced an extension meeting to be held 11/15/2019, in case it is unable to close its transaction in advance of the 11/17/2019 liquidation deadline.

Charter Extensions
  • Legacy Acquisition Corp. (LGC) shareholders approved a charter extension through 12/21/2019 with five additional one month extensions at the company's option. Legacy's acquisition target, Blue Impact, will contribute $0.03 per share for each monthly extension. Holders of 694,820 public shares (2.3%) exercised redemption rights in connection with the extension.
  • Trident Acquisitions Corp. (TDAC) plans to hold a meeting 11/26/2019 to extend the company's charter for six months until 5/29/2020. No contribution to trust was announced, and the proxy includes a voting requirement to exercise redemption rights, meaning public holders cannot redeem if they do not hold settled shares as of the record date for the meeting, 10/31/2019.
  • Opes Acquisition Corp. (OPES) plans to hold a meeting on 11/15/2019 to secure a second extension of the company's charter. The company hasn't yet announced an extension date, and though the proxy indicates that there will be a sponsor deposit contribution for each extension month, the amount was left blank in the preliminary proxy.

Links
  • Here's a writeup from S&P Global of Tiberius Acquisition's (TIBR) pending deal to acquire International General Insurance.
  • Yelena Dunaevsky of Woodruff Sawyer takes a look at the merits of Representations and Warranties Insurance ("RWI") for SPAC transactions.
  • Platinum Equity, the PE firm founded by Tom Gores (the brother of serial SPAC sponsor Alec Gores) has inked a deal to acquire Cision Ltd. (formerly Capitol Acquisition Corp. III) for $2.74bn, or $10 per share in cash.
  • Bloomberg reported that Churchill II (CCX), Michael Klein's second SPAC, is considering a bid for Spanish-language broadcaster Univision.
Disclosures: Site administrators are long IPOA, CCX, CCX/W, GLACW, TMCX, TMCXW, LGC/W, TDACW, OPESW, TIBR, TIBRW and may trade in or out of positions in these or other SPAC securities at any time. Nothing on spacresearch.com is a recommendation or solicitation to buy or sell any investment.