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SPAC Trend Rolls On, Attracts UHNW Investors

Tom Burroughes, Group Editor , February 10, 2021

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The surge in activity around special purpose acquisition companies shows no signs yet of slowing down, even though some commentators have raised concerns.

The surge in activity around blank-check acquisition companies continues, with a report that veteran investor Bill Foley, owner of Vegas Golden Knights, intends to issue public filings as soon as this week. Separately, Colin Kaepernick, the former San Francisco 49ers quarterback turned activist, is getting into the act.

And, as Family Wealth Report has been told, the business of advising high net worth and ultra-HNW clients on investing in special purpose acquisition companies, as well as sponsoring them and using them in acquisitions, has been an important one. SPACs raise funds in an IPO to acquire a private company, which then becomes public as a result of the merger.

A period of ultra-low interest rates, a still-robust equity market, and expected valuation opportunities caused by disruption amid the COVID-19 pandemic, have combined to help drive IPOs sharply higher. As we have heard in calls with private banks, this area is drawing in money from family offices, private banks and other wealth managers.

A report by Reuters on February 9 said that Foley will name his SPACs after a Napoleonic battle, seeking around $1.5 billion in total when they float. The report cited an unnamed source. Public filings related to Austerlitz Acquisition Corp I and Austerlitz Acquisition Corp II could be published as early as this week. A representative for Foley declined to comment.

In the case of Kaepernick, he will serve as the co-chair of Mission Advancement Corp, which will seek to raise up to $287.5 million in an IPO, the Wall Street Journal reported yesterday, citing documents filed to the Securities and Exchange Commission yesterday. 

These exchange-listed shell companies are expanding in number and value. Listings rose to 230 last year, with a total issue volume of $75.8 billion (source: EY). Those numbers are up from 60 listings in 2019, netting a total of $13.7 billion in proceeds. This isn’t only a US phenomenon – more deals are going on in Europe. These entities have actually been around for a while. 

Some commentators urge market participants to be careful. For examplel, Michael Klausner, a professor at Stanford Law School, and Emily Ruan, a management consultant in San Francisco, recently said that the SPAC trend was a bubble and could soon burst.  As noted here, the winning formula for SPACs is that buyers get a 20 per cent stake in the financing vehicle at a low cost, which turns into a big stake in the target company after a merger. Sellers can go public without the hassles and restrictions of a traditional IPO. It remains to be seen whether the SPAC structure will work in the US Registered Investor space, given the already-strong M&A market there.

Military names
The Reuters report noted that Foley has been one of the most prominent dealmakers in the recent Wall Street action involving SPACs. His most recent two, Foley Trasimene Acquisition Corp and Foley Trasimene Acquisition Corp II, in recent months have agreed mergers with US benefits services provider Alight Solutions and payments processor Paysafe Group Holdings, respectively.

The names of the latest SPACs comes from the Battle of Austerlitz (1805), the great military triumph of Napoleon Bonaparte, in which French forces defeated larger armies belonging to Russia and Austria.

Previously, Foley has named SPACs after a conflict from the war between the Roman Republic and Carthage in the second century BC.

Kaepernick’s Wall Street turn
The WSJ report said that the Mission Advancement entity will stress the racial and diversity issues Mr. Kaepernick has championed on and off the field through its investment in the growing environmental, social and governance investment sector. It aims to target consumer businesses with an enterprise value of more than $1 billion, the report said. 

Mission Advancement will be co-chaired by Jahm Najafi, who runs the private-equity firm Najafi Companies and is a minority owner in the NBA’s Phoenix Suns. Together, they lead a board that is made up of members who are majority female and 100 per cent Black, indigenous and people of color. Other board members include Katie Beauchamp, the CEO and co-founder of Birchbox and Omar Johnson, a former executive at Apple and Beats by Dre. 




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