This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

SPACs Live on Without the Acronym

Stocks in this article: CLACU TWO BKW C GS

NEW YORK ( TheStreet) -- Remember SPACs? You can easily be forgiven for not doing so, since they never amounted to much.

Nonetheless, and despite lower upfront fees, banks are finding it worthwhile to underwrite these deals, which they predict will become more frequent.

Special purpose acquisition companies, which had their heyday from roughly 2005-2007, are shell companies sent out in search of acquisition targets. SPACs from that era weren't especially successful, which may explain why dealmakers involved in trying to revive the structure are shying away from dusting off the old acronym.

"We feel very much that we're in the early innings in the post-financial crisis era of acquisition vehicles," says Philip Drury, co-head of Equity Capital Markets for the Americas at Citigroup (C). "We're certainly getting a lot more inquiries."

Drury says an impressive roster of well-respected investors participated in the IPO of Capitol Acquisition Corp. II (CLACU), which raised $200 million via a Citigroup-led initial public offering in May.

Other post-crisis SPACs include JWC Acquisition Corp., which went public in late 2010 and bought Tile Shop Holdings Inc. (TTS) in 2012, and Justice Holdings, which went public in 2011 and acquired Burger King Worldwide (BKW) last year.

One of the attractions of SPACs for investors is their limited downside. Acquisitions vehicles that don't complete a deal within a specified time frame (usually two years) return the money they raised to investors. As a result, investors who bought into SPACs in 2007 avoided the worst of the financial crisis in 2008 and early 2009.

For investors who believe the market is likely to move lower or sideways over the next several months, the opportunity to effectively put one's money in escrow while waiting for a potential pop from a successful deal may prove attractive, say proponents of the structure.

"We're entering into a stock picking environment. That is where the acquisition vehicles come into their own," Citigroup's Drury says.

The structure has been tweaked a bit to function more smoothly. Pre-crisis SPACs often included two in-the-money warrants, which was dilutive and encouraged investors to take advantage of the arbitrage between the value of the warrants and the shares. Now they include fewer warrants or none at all. Other changes make it more difficult for investors to block potential deals. And SPAC sponsors tend to be people who have done them previously and successful made acquisitions using the structure, according to Mark Ein, an investor who worked at The Carlyle Group (CG) and Goldman Sachs (GS) and is Chairman and CEO of Capitol Acquisition Corp. II.

"We consider this sort of the next generation vehicle," Ein says.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs