SPACs are (Only?) a Yield Play Now

SPACs are now locked in a market dynamic that will keep prices below NAV, redemptions on the march and have yield investors licking their chops.
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SPACs didn't start well on Friday morning with lots of big news. The morning saw:

  • Mudrick Capital Acquisition II (MUDS) announced its deal with Topps is off 
  • Spring Valley Acquisition Corp (SV) rescheduled its meeting
  • CA Healthcare Acquisition Corp (CAHC) cut the valuation of its deal with LumiraDx
  • And, maybe biggest of all, Bill Ackman sent a letter to shareholders that PSTH is likely to liquidate

More on each of these below, but they all fit with the current narrative. SPACs are up against a wall as sentiment is at a low point and market dynamics are firmly entrenched in a way that will keep pre-deal and announced SPACs firmly below NAV and drive significant redemptions for yield purposes. 

Sponsors will have to change the economics in some way and likely it will be the PIPEs that fuel SPAC deals for the foreseeable future. But, to permanently get out of this dynamic, SPACs will certainly have to evolve in a way that better aligns stakeholder incentives -- sponsors simply can't be the only winners in the deal.

However, just because most of the SPAC market is down, doesn't mean there can't be a few upside surprises. Today Vector Acquisition Corporation (VACQ) shareholders approved its merger vote with Rocket Lab, and saw just $9.7M of redemptions, or < 3% of the SPAC’s trust. It’s the rare recent SPAC that’s actually hung on to the majority of its trust following a merger vote. VACQ closed +4.6% today to $10.47 and will trade as RKLB starting 8/25.

vacq_20210820

MUDS & Topps Call Off their Deal

The Mudrick Capital Acquisition II (MUDS) and Topps combination was once one of the hottest SPAC deals out there. In fact, Topps was was bucking the trend of most SPACs: they had real revenue, an established company, and were raising guidance in the face of SPACs withdrawing and lowering.

However, that all came to a screeching halt yesterday when the MLB (a 70 year partner of Topps) announced it would not be renewing its license with Topps - instead switching over to the high-flying Fanactics by 2026. In light of this news, Mudrick and Topps "mutually agreed" to part ways.

MUDS now has slightly over a year to reset and find a new SPAC target. The once high flying SPAC dropped 2.77% on the day and now is firmly below NAV at $9.83. 

muds_stock_20210820

SV / AeroFarms Reschedule Meeting

Spring Valley Acquisition Corp (SV) and vertical farming company AeroFarms were due to vote on their business combination today, but the company announced in a press release that they are postponing until 8/30 saying they need more time to satisfy closing conditions.

See the full press release here.

SV dipped well below $10 as it went ex-redemption this week - so it's safe to wonder if that has something to do with the postponement.

The original deal called for $232M in SPAC trust + a $125M PIPE as part of the merger financing and a $225M minimum cash balance. Did redemptions cause the company to dip below min cash? We will wait and see.

CAHC Cuts Deal Valuation

LumiraDx and CA Healthcare Acquisition Corp (CAHC) agreed to slash their deal valuation by 40% from ~$5B EV to ~$3B EV, citing market conditions and feedback from shareholders.

See the full press release here.

CAHC stock slightly up on the news, though still discounted at $9.90.

Ackman Seeks to Return PSTH Trust

Following the announcement of the lawsuit against Pershing Square Tontine Holdings (PSTH) Bill Ackman issued a letter to shareholders last night.

TLDR: if his SPARC gets approved PSTH will return its $4B in trust to its shareholders, citing the pending lawsuit as an obstacle in getting a deal done in the 11 months PSTH has left.

PSTH dipped below NAV for its first time ever yesterday and finished down almost 1.25% today. Reminder, PSTH shares were priced at $20 vs. the typical $10.

Pershing Square Tontine Holdings (PSTH) may liquidate 

Pershing Square Tontine Holdings (PSTH) may liquidate 

Recent SPAC Deal Announcements

Fitting in with the current narrative, SPACs that have recently announced deals are almost all below $10. Watch these as yield plays as they have shorter times to maturity and for those considering holding, hold your hats as redemptions will likely be big.

Aug 18 | $ 9.82 | IPVF - InterPrivate III Financial Partners Inc. --> Aspiration Partners
Aug 18 | $ 10.03 | ADF - Aldel Financial Inc. --> Hagerty
Aug 16 | $ 9.83 | SLCR - Silver Crest Acquisition Corporation --> Tim Hortons China
Aug 16 | $ 9.85 | MBAC - M3-Brigade Acquisition II Corp --> Syniverse Corp
Aug 13 | $ 9.81 | MTAC - MedTech Acquisition Corporation --> Memic Innovative Surgery Ltd.
Aug 12 | $ 9.88 | FRSG - First Reserve Sustainable Growth Corp --> EO Charging
Aug 11 | $ 9.83 | EUSG - European Sustainable Growth Acquisition Corp. --> ADS-TEC Energy GmbH
Aug 10 | $ 9.84 | ENVI - Environmental Impact Acquisition Corp. --> Greenlight Biosciences Inc.
Aug 10 | $ 9.81 | ASAX - Astrea Acquisition Corp. --> HotelPlanner
Aug 09 | $ 9.94 | MCMJ - Merida Merger Corp. I --> Leafly Holdings, Inc.
Aug 09 | $ 9.90 | MPAC - Model Performance Acquisition Corp --> MultiMetaVerse Inc.
Aug 06 | $ 9.82 | CMLT - CM Life Sciences III Inc. --> EQRx, Inc.
Aug 05 | $ 9.85 | GCAC - Growth Capital Acquisition Corp. --> Cepton Technologies, Inc
Aug 04 | $ 9.86 | FTAA - FTAC Athena Acquisition Corp. --> Pico
Aug 02 | $ 9.82 | VPCB - VPC Impact Acquisition Holdings II --> Kredivo
Aug 02 | $ 10.06 | YSAC - Yellowstone Acquisition Co --> Sky Harbour LLC

SPAC Movers

Biggest SPAC Gainers
8.79% ~ $ 10.02 | AHAC - Alpha Healthcare Acquisition Corp (Announced)
4.09% ~ $ 9.92 | SV - Spring Valley Acquisition Corp (Announced)
3.63% ~ $ 10.00 | MCAF - Mountain Crest Acquisition Corp. IV (Pre-Deal)
2.20% ~ $ 11.60 | FWAA - Fifth Wall Acquisition Corp. I (Announced)
1.73% ~ $ 10.00 | CFFE - CF Acquisition Corp. VIII (Pre-Deal)
1.55% ~ $ 9.80 | LWAC - Locust Walk Acquisition Corp. (Announced)
1.44% ~ $ 14.75 | RICE - Rice Acquisition Corp. (Announced)
1.24% ~ $ 9.76 | LOKM - Live Oak Mobility Acquisition Corp. (Pre-Deal)
1.14% ~ $ 9.74 | DNZ - D and Z Media Acquisition Corp. (Pre-Deal)
1.08% ~ $ 9.77 | ATWO - two (Pre-Deal)
1.03% ~ $ 9.78 | CPUH - Compute Health Acquisition Corp. (Pre-Deal)
1.03% ~ $ 9.81 | IGAC - IG Acquisition Corp (Pre-Deal)
1.03% ~ $ 9.82 | FMAC - FirstMark Horizon Acquisition Corp (Pre-Deal)
1.03% ~ $ 9.85 | PHIC - Population Health Investment Co Inc (Pre-Deal)
1.01% ~ $ 10.05 | SGAM - Seaport Global Acquisition Corp (Announced)
.93% ~ $ 9.72 | BRPM - B. Riley Principal 150 Merger Corp. (Pre-Deal)
.93% ~ $ 9.72 | TWNI - Tailwind International Acquisition Corp. (Pre-Deal)
.88% ~ $ 10.29 | XPDI - Power & Digital Infrastructure Acquisition Corp. (Announced)
.83% ~ $ 9.75 | PLMI - Plum Acquisition Corp. I (Pre-Deal)

Biggest SPAC Losers
-3.14% ~ $ 8.94 | RMGB - RMG Acquisition Corporation II (Announced)
-3.00% ~ $ 9.66 | EOCW - Elliott Opportunity II Corp. (Pre-Deal)
-2.91% ~ $ 9.69 | GWAC - Good Works Acquisition Corp (Announced)
-2.77% ~ $ 9.83 | MUDS - Mudrick Capital Acquisition Corporation II (Announced)
-2.55% ~ $ 10.30 | LIVK - LIV Capital Acquisition Corp. (Announced)
-2.37% ~ $ 10.31 | AGC - Altimeter Growth Corp. (Announced)
-1.82% ~ $ 10.80 | LEGO - LEGATO MERGER CORP. (Announced)
-1.64% ~ $ 9.62 | IBER - Ibere Pharmaceuticals (Pre-Deal)
-1.60% ~ $ 9.82 | SNPR - Tortoise Acquisition Corp II (Announced)
-1.56% ~ $ 10.08 | TPGY - TPG Pace Beneficial Finance Corp (Announced)
-1.54% ~ $ 10.22 | CND - Concord Acquisition Corp (Announced)
-1.30% ~ $ 19.73 | PSTH - Pershing Square Tontine Holdings (Pre-Deal)
-1.30% ~ $ 11.43 | FST - FAST ACQ CP (Announced)
-1.17% ~ $ 10.15 | LEAP - Ribbit LEAP Ltd (Pre-Deal)
-1.12% ~ $ 9.74 | KSMT - KISMET ACQ ONE (Announced)
-1.11% ~ $ 9.76 | NGC - Northern Genesis Acquisition Corp. III (Pre-Deal)
-1.10% ~ $ 9.85 | ARYD - ARYA Sciences Acquisition Corp IV (Pre-Deal)
-1.03% ~ $ 9.62 | ARTA - Artisan Acquisition Corp. (Pre-Deal)
-1.01% ~ $ 9.85 | JUGG - Jaws Juggernaut Acquisition Corporation (Pre-Deal)
-1.00% ~ $ 9.95 | FTVI - FinTech Acquisition Corp. VI (Pre-Deal)

More from Boardroom Alpha

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