Risks remain despite SPAC merger votes worth $5.85bn
20:32, 31 May 2022
A pair of SPAC merger votes totaling $5.85bn (£4.64bn) scheduled for this week will signal investor appetite for such initial public offerings, noted Renaissance Capital Senior Strategist Matthew Kennedy. The key metric to track, however, will be SPAC shareholder redemptions (company buybacks) in the current environment.
“In this risk-off environment, many investors would rather get the guaranteed $10 (per share initial investment) back rather than take their chance on a new company,” said Kennedy. “It’s true that SPACS are seeing widespread redemptions in this environment.”
The Renaissance IPO Index closed last week up 5.20%, index provider Renaissance Capital reported, underperforming the 6.60% gain in the broader S&P 500. The index was boosted primarily by a 34% gain in Chinese ride-share company DiDi Global (DIDI), but also weighed down by its tech components, led by a 10.7% decline in Pinterest (PINS).
Renaissance IPO ETF (NYSE: IPO)
Scheduled for Wednesday 1 June, RedBall Acquisition (RBAC) shareholders will vote on its proposed merger with online ticket reseller SeatGeek valuing the combined entity at $1.35bn. Assuming no shareholder redemptions, the transaction will total $675m, including $100m in PIPE securities.
Credit Suisse is acting as financial advisor for SeatGeek and Goldman Sachs is advising RedBall Acquisition. Following the merger, RedBall Acquisition stock, which trades on the NYSE under the ticker RBAC, will begin trading under the ticker STGK, also on the NYSE.
On Friday 3 June, SVF Investment (SVFC) shareholders will vote on its pending merger with artificial intelligence automated technology platform Symbiotic valuing the combined entity at $4.50bn. Assuming no shareholder redemptions, the transaction will total up to $725m, including $205m in PIPE funding, $150m of which comes from Walmart and an additional $200m forward equity purchase commitment from a unit of SoftBank. Walmart will retain a 9% stake in Symbiotic.
Goldman Sachs is acting as financial advisor for Symbiotic, while Deutsche Bank Securities is advising SVF Investment. Following the merger, SVF Investment stock, which trades on the Nasdaq exchange under the ticker SVFC, will trade under the ticker SYM on the Nasdaq exchange.
What is your sentiment on IPOus?
DiDi Global (NYSE: DIDI) price chart
Symbiotic boosted by PIPEs
“Symbotic's close peer UiPath (PATH), a 2021 IPO, is down about 61% year-to-date, which is certainly a headwind going into the merger,” added Renaissance’s Kennedy. “Though on the bright side, the company is raising over $400 million in a PIPE from backers Walmart and Softbank.”
The pre-placed PIPE backing virtually ensures the merger will go through, regardless of SVF shareholder redemptions, added Kennedy, calling the deal closing “almost certain.”
Pinterest Inc. (NYSE: PINS) price chart
SPAC activity will ‘eventually return’
In an interview with MarketWatch, NYSE vice chairman John Tuttle said that while SPAC mergers have slowed due, in part, to increased liability standards for transaction participants, he expects SPAC activity to eventually return to record levels seen last year.
“There could be companies where they believe having an alignment with a sponsor can bring strategic benefit to the company, whether it be from their experience, network, or even just guidance and governance, that could be helpful to the company as it transitions to become a public company,” he told the outlet in an interview.
Recent SPAC loses 87.5%
Last week saw the largest SPAC merger to date, when SPAC Lionheart Acquisition merged with medical receivables collector MSP Recovery (MSPR), to disastrous results. MSP Recovery stock opened Tuesday at the $10.78 per share merger price before falling 53% to $5.06. SMSP Recovery is currently trading on the Nasdaq exchange at $1.45 per share, down over 87% from the IPO price, under the ticker MSPR.
Driving the stock down was a Forbes report alleging questionable receivables valuations. MSP Recovery responded to the Forbes article in a release, noting “MSPR’s claims and data processes have been substantiated by significant court victories – including evidentiary hearings, and state and federal trial and appellate courts – and have resulted in settlements and favourable court rulings.”