These Dealmakers will Make or Break SPACs in 2022
The Rundown - Your weekly SPAC Deep Dive (01/13/22)
While a majority of SPAC dealmakers have faced issues such as raising adequate financing for deals or acquiring high-quality merger targets, Serial SPAC Sponsors appear to have emerged relatively unscathed.
Serial Sponsors such as Gores, Palihapitiya, Cohen and Klein delivered the biggest deals of the industry, with post-merger performance largely outperforming De-SPACs as a whole. With 2022 being billed as the year of consolidation in SPACs, these sponsors have the potential to make or break the industry.
Gores Group Â
Billionaire Investor Alec Gores and his team at the Gores Group have Sponsored more SPACs than anyone else. Gores also has the longest and best track record on the list, and the first-ever PIPE in the firm’s first SPAC deal with Hostess Brands dating back to 2016.
Gores had early SPAC success as he often used the vehicle to buy firms from his brother’s private equity firm Platinum Equity, including Fleet Management technology company Verra Mobility and US Department of State supplier PAE.
Gores has solidified his reputation in SPACs over the last two years by taking Lidar startup Luminar and Spatial Data company Matterport. The former is up over 50% nearly a year after its deal, while the latter has surged 40%. Despite these wins, Gores hasn’t come out pristine from the abrupt collapse of De-SPACs, with both Ardagh Metal & UWM Holdings down significantly after closing a deal.
Gores has continued the pace of deals, with transactions for sustainable materials company Footprint and Hospitality company Sonder being announced at the end of last year (Sonder has seen its valuation revised downwards to reflect market conditions).
Gores’ biggest win has come with the $20 billion merger agreement with Swedish EV Maker Polestar. Unlike most EV-Makers backed by SPACs, Polestar has significant delivery volumes, with over 29,000 vehicles produced in 2021, and looks to be a major winner in 2022.
Polestar’s recent Partnership with Luminar might be a glimpse at the future where De-SPACs from the same Sponsor work together, similar to startups that receive capital from Venture Firms. Going into 2022, GSEV is currently in talks with MMA Promoter One Championship and GTPB is rumored to merge with Alto Pharmacy.
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Social CapitalÂ
After two years of blockbuster deals, Chamath Palihapitiya and his VC firm Social Capital went cold turkey on SPACs in 2021. Last year as a whole was a big loss for SPACs that were either Funded or Backed by Social Capital.
Fintech Firm SoFi debuted nearly a year ago and has seen its stock slide 30% as investors have questioned the viability of the large losses that the company racked up. Virgin Galactic has lost nearly 60% of its value since last year while Clover Health is down a staggering 74%.
Opendoor, which has been the poster child for Palihapitiya in terms of growth, has seen its stock sink 50% after investors were spooked about the housing market after Zillow’s recent fiasco.
Social Capital’s PIPE Deals have fared even worse, with Desktop Metals down 60% and MetroMile being sold off to Lemonade at a 70% discount a year after debuting. Palihapitiya himself hasn’t been shy about dumping a majority of these holdings after the PIPE lockup expired, stating that relative valuations have been plummeting since the first quarter of 2021.
A new year brings a fresh start for both Palihapitiya and his team to reset the wheel and kick-start SPACs all over again. Currently, Social Capital has six SPACs scouting for deals, including four in a partnership with Suvretta Capital and Two Hedosophia SPACs.
Each of the four Suvretta SPACs is targeting a sub-sector within Biotechnology, including neurology, oncology, organs & immunology. Rumors are floating around that Palihapitiya may close two deals soon, with DNAC set to be in talks with ProKidney and DNAA discussing a potential deal with Akili Interactive.
FinTech AcquisitionÂ
Betsy Cohen and FinTech Acquisition have taken a sectoral approach to close SPAC deals, which is uncommon for most serial sponsors. Cohen has raised over $3 billion for ten SPACs since 2015, using her experience at Fintech firm Bancorp to find companies across the US and in Emerging Markets.
Cohen saw early success by taking payment processing firm CardConnect Public in 2016 and International Money Express, which focused on wire transfers public.
In a bid for consolidation, Cohen moved quickly in 2020 and 2021, announcing deals for integrated payments provider Paya, global payments platform Payoneer and financial advisory firm Perella Weinberg Partners.
Cohen benefited from the enthusiasm around Fintech, but the sector has seen a re-rate in valuations in the latter half of the year, resulting in many of Cohen’s De-SPACs underperforming the market.
Cohen’s $10 billion deal with brokerage firm eToro has also hit a snag recently, with the merger being delayed twice and seeing its valuation cut by 15%, as investors remain concerned with market leader Robinhood struggling recently.
While lower valuations spell bad news for Cohen, investors may emerge as winners, with the latest deals seeming far more appealing at a discount. Looking forward, Cohen still has three SPACs currently looking for deals, with FTVI rumored to merge with Cassava Technologies in 2022.
Churchill CapitalÂ
Michael Klein and Churchill gained widespread fame for taking Lucid Motors Public in 2021, with Churchill holding the record for the best De-SPAC Returns in a year.
But long before Klein joined the SPAC party, the ex-Citi dealmaker was an advised large deal on Wall Street, such as Dow’s $130 Billion Deal with DuPont, and Barrick Gold’s $18 billion mergers with Randgold.
Klein hasn’t had the best year with SPAC dealmaking, facing a litany of issues, including not having enough votes to close the Lucid deal initially, failing to close out a deal with Amazon Aggregator Thrasio due to a complicated audit, and facing an investor lawsuit with the MultiPlan deal.
Churchill and Klein will aim to make a comeback in 2022, with bigger and better deals than in 2021.
Of the three Churchill SPACs that are currently looking for a deal, there are talks of CCVII reportedly merging with Indian EdTech Startup in a $48 billion deal, making it the largest SPAC transaction to date, while CCV will be on the lookout for a new deal after failing to merge with Thrasio.