Everything You’ve Wanted to Know About SPACs but Were Afraid to Ask (with a local twist)
Special Acquisition Companies (SPAC) have been all the rage this year. As of September, a total of 86 SPACs have been completed, raising more than $33 billion and marking 2020 as the busiest year in SPAC history. However, this begs the question, “what exactly is a SPAC?”
“A special purpose acquisition company (SPAC) is a company with no commercial operations that is formed strictly to raise capital through an Initial Public Offering (IPO) for the purpose of acquiring an existing company. Also known as “blank check companies,” a SPAC is formed to raise money through an initial public offering to buy another company. At the time of their IPOs, SPACs have no existing business operations or even stated targets for acquisition. Investors in SPACs can range from well-known private equity funds to the general public. SPACs have two years to complete an acquisition or they must return their funds to investors.”
Notable SPACs this year include…
- Nikola (NKLA), everybody’s favorite hydrogen and electric car maker whose founder resigned in controversy a mere two weeks after General Motors (GM) took an 11% stake in the company, went public via reverse merger with VectorIQ Acquisition Corp in a deal that valued NKLA at $3.3 billion.
- Momentus (MNTS), a space transportation specialist firm announced last week that Stable Road Capital will take it public, valuing the company at $1.2 billion.
- Clover Health, a Medicare insurer, will merge with Chamath Palihapitiya’s Social Capital Hedosophia Holdings Corp III, valuing the healthcare firm at $3.7 billion.
- Opendoor confirmed in September that it would merge with another of Palihapitiya’s SPACs, Social Capital Hedosophia Holdings II, valuing the real estate brokerage firm at $4.8 billion.
- Palihapitiya’s first SPAC merged with Virgin Galactic last year and the Sri Lankan venture capitalist has since filed for Social Capital’s 4th and 5th SPACs.
The local twist has to do with Billy Beane, the executive vice president of baseball operations for the Oakland A’s baseball team. Beane, who has been part of the A’s for thirty years and is known for bringing data analysis to the game of baseball for the purpose of evaluating talent (see the book “Money Ball” and movie of the same name), joined RedBall Acquisition, a sports SPAC, as co–chairman of the company in June. Monday, news leaked that RedBall will be acquiring Fenway Sports, the parent company of the Boston Red Sox. If the rumor proves true, it will mark the end of Beane’s three-decade run with the Athletics as he will not be allowed to run the A’s, in which he is a minority owner, and also have a financial interest in the Red Sox.