More SPAC Questions

De-SPAC questions, regulatory involvement, and redemptions are all on the rise in a SPAC market where everything is trading down and there is little to be excited about.
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Recent De-SPAC ATI Physical Drops 53%

As the SPAC market continues to trudge along in a state of below NAV prices and lackluster deals, more questions continue to be asked. Andrew Walker's Yet Another Value Blog has a nice write-up of ATI Physical's (ATIP / a recent de-SPAC) earnings debacle that has seen it drop 53% since July 22nd. 

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The short story is that ATI Physical's results and guidance are dramatically off where its deal investor presentation had it and the picture is bleak. It's yet another example of pre-deal guidance missing the mark significantly and investors primarily left holding the bag.

Continuing instances of bad behavior -- even the appearance of it -- will create additional downward pressure on the SPAC market going forward. And, it will certainly be a factor as we continue to see increasing and high redemptions at deal vote. Given the growing risk in owning de-SPACs, many will be happy to simply take the yield and then redeploy capital elsewhere.

Redemptions Risk Zombie deSPACs

The market is increasingly seeing big redemptions at deal vote for many SPACs. This shouldn't be surprising given where most SPACs are trading (below NAV) and increased participation from yield investors. But they represent a real risk to investors who don't redeem and will almost certainly have initial losses as the redemptions are disclosed. They face even bigger losses when the resulting combined company might not have the anticipated cash to be able to deliver on the promise of the original deal. 

Another two deals highlight this risk. Revolution Acceleration Acquisition (RAAC) just announced that shareholders redeemed $232,551,292 worth of shares leaving only $54,989,588 of its original trust for the post deSPAC business (there was a $165M PIPE). How that ultimately affects Berkshire Grey (BGRY) going forward remains to be seen, but there is a big difference between having ~$250m in cash to contribute vs ~$55m. 

Roth Acquisition II (ROCC) also announced that ~90% of the trust redeemed at its shareholder vote on the Reservoir Holdings deal. And, yet another cash minimum waived as $300m worth of shares were redeemed at the Capitol Investment Corp. V (CAP) vote on the Doma deal.

Yesterday we noted that Decarbonization Plus (DCRN) added a PIPE for its deal to take Tritium public. We'd taken note given Palantir's (PLTR) growing tentacles in the SPAC market, but more interesting is how PIPEs may be the only thing that really allows SPACs to get these deals done in the near future. If that's the case, PIPE deals could become more interesting and important to watch.

ICYMI: A SPAC Risk Exposed?

Regulatory Involvement Welcome (probably) and Necessary (certainly)
Additional regulator involvement in SPACs is probably a good thing considering the level of perceived, and some real, level of shadiness that's occurring in the SPAC market. Last week, the Financial Industry Regulatory Authority (FINRA), put its hat into the ring alongside the SEC. In a speech, CEO Robert Cook announced that FINRA is in the “early stages of preparing some targeted sweeps” of SPACs. 

What exactly this will entail and the end result isn't clear at this point, but certainly additional pressure on SPAC sponsors and target companies to operate ethically and in alignment with all stakeholders will be welcome.

Since around April 2021 the SEC has been gradually stepping up its involvement in SPACs. Their latest, and probably most significant action so far, was their announcement on July 13 of an $8 million enforcement action against a Stable Road Acquisition Company, its sponsor and the target company Momentus for, among other things, misrepresentations, omissions, and inadequate due diligence.

Many on Twitter were also happy to see new SEC Chairman Gary Gensler joining in order to add a little more on-going transparency to what he and the SEC are up to. As you might imagine, a lot of the commentary suggested -- often humorously -- that a light review of the SPAC market might be worth their time.

SPAC Deal: Spartan Acquisition Corp. III (SPAQ) taking Allego Public
EV charging is a space that is heating up with adoption starting to rise and Tesla challengers trying to eat away at its charging station advantage. So, not surprising to see Fisker (FSR) in this deal as it works to build a real foothold in the space.

SPAC Deal: Queen's Gambit Growth Capital (GMBT) taking Swvl Public

Wednesday SPAC IPOs

  • Alpha Partners Technology (APTM /U) raised $250M with 1/3 warrants and is focused on technology
  • Mercury Ecommerce (MEAC /U) raised $175M with 1/2 warrants and is, unsurprisingly, focused e-commerce.
  • DA32 Life Science Tech Acquisition Corp (DALS /U) raised $200m and is focused on the life sciences sector

Tuesday's SPAC Movers

Biggest Gainers

2.79% ~ $ 9.95 | GLBL - Cartesian Growth Corporation (Pre-Deal)
2.64% ~ $ 10.10 | GIW - GigInternational1, Inc. (Pre-Deal)
2.48% ~ $ 9.90 | TLGA - TLG Acquisition One Corp. (Pre-Deal)
2.30% ~ $ 9.34 | ROCC - Roth CH Acquisition II Co. (Announced)
2.25% ~ $ 10.23 | LAAA - Lakeshore Acquisition I Corp. (Pre-Deal)
2.08% ~ $ 9.83 | OEPW - One Equity Partners Open Water I Corp. (Pre-Deal)
1.95% ~ $ 9.85 | RCLF - Rosecliff Acquisition Corp I (Pre-Deal)
1.65% ~ $ 9.83 | MACQ - MCAP Acquisition Corporation (Announced)
1.45% ~ $ 9.78 | TETC - Tech and Energy Transition Corporation (Pre-Deal)
1.45% ~ $ 9.79 | DHHC - DiamondHead Holdings Corp. (Pre-Deal)
1.34% ~ $ 9.80 | PMGM - Priveterra Acquisition Corp. (Pre-Deal)
1.24% ~ $ 9.78 | EJFA - EJF Acquisition Corp (Pre-Deal)
1.14% ~ $ 9.75 | TWNI - Tailwind International Acquisition Corp. (Pre-Deal)
1.04% ~ $ 9.74 | ANZU - Anzu Special Acquisition Corp I (Pre-Deal)
1.04% ~ $ 9.75 | AMPI - Advanced Merger Partners, Inc. (Pre-Deal)
1.04% ~ $ 9.75 | GXII - GX Acquisition Corp. II (Pre-Deal)
1.02% ~ $ 9.95 | MAQC - Maquia Capital Acquisition Corporation (Pre-Deal)
.93% ~ $ 9.72 | CPTK - Crown PropTech Acquisitions (Pre-Deal)
.93% ~ $ 9.75 | FSNB - Fusion Acquisition Corp. II (Pre-Deal)
.93% ~ $ 9.75 | DHBC - DHB Capital Corp. (Pre-Deal)

Biggest Losers

CAP lost 7.6% on the day of its deal vote, waiting to see how redemptions shake out there.

-7.59% ~ $ 8.89 | CAP - Capitol Investment Corp V (Announced)
-5.11% ~ $ 9.10 | DGNR - Dragoneer Growth Opportunities Corp (Announced)
-3.85% ~ $ 9.91 | RACB - Research Alliance Corp. II (Pre-Deal)
-3.27% ~ $ 10.65 | AGC - ALTIMETER GROWTH CORP (Announced)
-2.91% ~ $ 9.68 | RTPZ - Reinvent Technology Partners Z (Announced)
-2.84% ~ $ 9.24 | TWND - Tailwind Acquisition Corp (Announced)
-2.13% ~ $ 9.66 | GGMC - Glenfarne Merger Corp. (Pre-Deal)
-1.88% ~ $ 9.91 | CHAQ - Chardan Healthcare Acquisition 2 Corp. (Announced)
-1.50% ~ $ 10.53 | FTCV - FinTech Acquisition Corp. V (Announced)
-1.49% ~ $ 9.94 | BCTG - BCTG Acquisition Corp. (Announced)
-1.40% ~ $ 9.84 | FVAM - 501 ACQ CORP (Pre-Deal)
-1.40% ~ $ 9.88 | AGCB - Altimeter Growth Corp. 2 (Pre-Deal)
-1.39% ~ $ 12.08 | TPGY - TPG Pace Beneficial Finance Corp (Announced)
-1.36% ~ $ 10.12 | CND - Concord Acquisition Corp (Announced)
-1.26% ~ $ 10.21 | PDAC - Peridot Acquisition Corp (Announced)
-1.14% ~ $ 9.51 | NEBC - Nebula Caravel Acquisition Corporation (Announced)
-1.12% ~ $ 9.67 | RKTA - Rocket Internet Growth Opportunities Corp. (Pre-Deal)
-1.11% ~ $ 9.79 | SVAC - Starboard Value Acquisition Corp (Announced)
-1.02% ~ $ 9.72 | FZT - FAST Acquisition Corp. II (Pre-Deal)
-.99% ~ $ 10.02 | SRAC - Stable Road Acquisition Corp. (Announced)

More from Boardroom Alpha

More from Boardroom Alpha For ongoing tracking, analytics, and data on SPACs checkout Boardroom Alpha's SPAC Data and Analytics service.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report.)

More from Boardroom Alpha

More from Boardroom Alpha For ongoing tracking, analytics, and data on SPACs checkout Boardroom Alpha's SPAC Data and Analytics service.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report.)