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Warren Buffett Piles on SPACs and CF Finance Lowers Deal Valuation

It was a bad day for SPACs as Warren Buffett piled on SPACs; CF Finance lowered their deal valuation with AEye; and today's MAAC deal had no pop.

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Stocks were mixed on Monday, the S&P500 was up / NASDAQ down, though this morning's SPAC M&A deal (MAAC) once again underperformed. MAAC closed up just 0.9% and below NAV at $9.95 -- marking yet another disappointing day-1 pop for newly announced SPAC M&A. 

Warren Buffett and Charlie Munger held Berkshire Hathaway's much watched virtual annual meeting over the weekend, and one of the talks of the town today (aside from naming his CEO successor) was his view on "killer" SPACs: 

While portions of his SPAC views aren't entirely apples to apples to Berkshire's playbook (SPACs target private companies) the warnings regarding sponsors are fair to be taken seriously. If someone has 2 years to buy a company or return the money, chances are they (the sponsor) will do everything they can to find a target -- regardless of their true views on the target business and/or valuation. 

Which brings us back to some of the points seasoned SPAC investors make: do your due diligence and only allocate your capital to sponsors that you trust and have demonstrated track records, and give preference to those with lockups, performance vesting and other structural features (SAIL, CAPS etc.) that better align the sponsor's risk with yours.   

CF Finance Acquisition Amends Deal with AEye

CF Finance Acquisition III (CFAC) slashed its agreed upon valuation of target AEye, reducing its value from $1.9B to $1.5B. In addition, they added 10 cents per share to its trust congruent with extending its deal deadline out til September 2021 from May.  CFAC closed up 0.5% on the announcement to $10.05

CF notes that this repricing was due to "recent valuation changes of publicly traded lidar companies and changing conditions in the automotive lidar industry." That's certainly true as most of their comps are de-SPACs and all are trading poorly. You can see their comps in the below slide from their deal announcement deck.

The sub-header has not aged well...

The sub-header has not aged well...

Unfortunately post-Peak SPAC, these deals have not been trading well. In fact, today most were down even more and with the exception of Luminar are very close to NAV, and for a few under: 

.83% ~ $ 9.75 | IPV - InterPrivate Acquisition Corp. -> AEVA, INC.
.40% ~ $ 10.02 | CFAC - CF Finance Acquisition Corp. III -> AEye, Inc.
-6.37% ~ $ 10.59 | CGRO - Collective Growth Corp -> Innoviz Technologies Ltd.
-2.29% ~ $ 10.65 | CLA - COLONNADE ACQ -> Ouster, Inc.
-7.19% ~ $ 12.78 | GRAF - Graf Industrial Corp. -> Velodyne Lidar
-3.43% ~ $ 21.97 | GMHI - Gores Metropoulos, Inc. -> Luminar Technologies, Inc.

Given the enhanced market and SEC scrutiny on SPACs, including the lofty financial projections and valuations of target companies, don't be surprised if more targets will ultimately come to the decision to amend any merger terms. 

ICYMI: Montes Archimedes Acquisition (MAAC) taking Roivant Sciences Public

This morning investors were treated with some Monday merger news with Montes Archimedes (MAAC) announcing it will take Roivant Sciences public in a deal valued at $5B. The deal includes a $200M pipe.

Investors that are worried about incentive alignment between common investors and SPAC insiders will be pleased to see that Patient Square Capital and key Roivant equity holders and management have agreed to long-term lockups. At least 50% of their holdings will be locked up for three years. Patient Square Capital is also converting an additional 30% of its shares of MAAC to earn-out shares subject to performance vesting thresholds: 20% of its shares will vest at $15.00 per share and 10% will vest at $20.00 per share for 20 of 30 trading days within five years of closing.

Biggest Daily SPAC Gainers

9.61% ~ $ 17.68 | MUDS - Mudrick Capital Acquisition Corporation II (Announced)
5.96% ~ $ 12.26 | VSPR - Vesper Healthcare Acquisition Corp (Announced)
5.89% ~ $ 10.61 | CCVI - Churchill Capital Corp VI (Pre-Deal)
2.38% ~ $ 11.60 | FTIV - FinTech Acquisition Corp. IV (Announced)
1.80% ~ $ 13.00 | DFHT - Deerfield Healthcare Technology Acquisitions Corp.(Announced)
1.80% ~ $ 10.20 | LSAQ - LIFE SCI ACQ II (Pre-Deal)
1.74% ~ $ 9.94 | HERA - FTAC Hera Acquisition Corp (Pre-Deal)
1.73% ~ $ 11.15 | ARYD - ARYA Sciences Acquisition Corp IV (Pre-Deal)
1.47% ~ $ 10.38 | TSIA - TS Innovation Acquisitions Corp (Announced)

Biggest Daily SPAC Losers

-7.76% ~ $ 11.88 | SRAC - Stable Road Acquisition Corp. (Announced)
-7.47% ~ $ 12.01 | CMII - CM Life Sciences II Inc. (Announced)
-7.02% ~ $ 8.21 | GIK - GigCapital3 Inc (Announced)
-5.60% ~ $ 19.91 | CCIV - Churchill Capital Corp IV (Announced)
-5.06% ~ $ 12.39 | CLII - Climate Change Crisis Real Impact I Acquisition Corp (Announced)
-4.57% ~ $ 17.75 | NGA - NORTHERN GN ACQ (Announced)
-3.85% ~ $ 10.99 | FTCV - FinTech Acquisition Corp. V (Announced)
-3.83% ~ $ 15.56 | ACTC - ArcLight Clean Transition Corp (Announced)
-3.71% ~ $ 16.37 | IPOE - Social Capital Hedosophia Holdings Corp V (Announced

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