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Three Houston SPACs announce plans to dissolve

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Last week three Houston SPACS (Special Purpose Acquisition Companies) announced plans to dissolve and return the monies raised during their IPOs to the shareholders.

Good Works Acquisition Corp II (GWII) will redeem all its shares, effective as of the close of business on March 16, 2023.  The announcement came one day after the collapse of its $723 million deal to take Direct Biologics, an Austin biotech company, public.  No reason was given for the collapse.

GWII went public in July 2021 in a $230 million IPO and had 15 months to complete a transaction.

The first Good Works SPAC took Cipher Mining public in August 2021 in a $2 billion transaction. The stock of the bitcoin miner is down 85% since going public.

Peridot Acquisition Corp II will redeem all its shares, effective March 13, 2023. In March 2021, it raised $360 million, seeking acquisitions in the environmental or recycling space.

The first Peridot SPAC took Li-Cycle public in August 2021 in a $975 million transaction. The stock of the company, which is a Lithium-ion battery recycler, is down about 45% since the deal.

ESM Acquisition Corp also went public in March 2021 in a $300 million IPO. It was looking for acquisitions of companies that mine commodities that are critical in order to achieve de-carbonization. The company will redeem its shares on March 12.

SPACS generally have two years from going public to complete a deal, though that time period can be extended with a shareholder vote. The exact terms are governed by the Articles of Association of each company.

After these three companies dissolve, there will still be 11 Houston-areas SPACs. A few have announced deals that haven’t yet closed. Some of the others are obtaining shareholder votes for extensions. For example Mercury Ecommerce (now called SEP Acquisition Corp) now has 36 months from its $175 million IPO in July 2021 to complete a deal.

SEC filing – Good Works Acquisition Corp II

SEC filing – Peridot Acquisition Corp II

SEC filing – ESM Acquisition Corp

Fertitta Entertainment tries to back out of deal with SPAC

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[UPDATE 12-09-21 – The deal has now been terminated. FEI will pay the SPAC $6 million immediately and either a further $10 million if the SPAC completes a deal to take another company public or $16 million if they don’t.]

The transaction to take Fertitta Entertainment (‘FEI’) public via a SPAC has effectively collapsed. Although the deal is not officially dead, the two parties have exchanged letters blaming the other for the deal failing to complete by the proposed deadline.



The deal with Fast Acquisition Corp (‘FAST’), a blank check company was announced back in February. The transaction would have seen most of the assets owned by Tilman Fertitta go public (446 restaurants and 5 Golden Nugget Casinos). Mr. Fertitta would have ended up owning 59% after the deal closed.

The deal was expected to close by December 1, 2021. If the deadline passed, the merger agreement allowed either party to terminate the agreement. FEI sent a letter to FAST, stating it would abandon the transaction.

FAST sent a letter in response stating that FEI was not permitted to terminate the agreement because the primary reason for the failure was that FEI didn’t deliver audited financial statements for the year ended September 30, 2020 by March 31, 2021, the deadline in the original merger agreement. FEI’s audited financials were issued August 2, 2021.

Changing Terms

One problem that FAST had was that Mr. Fertitta kept changing the terms of the deal. In late May, FEI proposed adding a bunch of assets, such as certain Vic & Anthony Restaurants, and the Galveston Pleasure Pier, that were originally excluded from the deal.  FAST accepted the revised terms, which would mean that Mr. Fertitta would end up with 79% economic ownership post-close.

In August, the online gaming division of Golden Nugget (GNOG), announced it would merge with DraftKings. FEI own 80% of GNOG, which is publicly-traded. Although that stake was part of the transaction with FAST, the management of FAST were not aware of the deal prior to the announcement.

It’s not clear why the deal has collapsed but Mr. Fertitta holds all the chips in the deal and clearly thinks he has better options elsewhere.

What is curious about the spat is that the two sides amended the merger agreement on June 1 to reflect the additional assets being added. However, there was no mention of a revised date for the financial statements, even though that deadline had come and gone.

FAST may have to liquidate

With the pending collapse of the deal, the management of FAST will have to complete an acquisition by August 2022, otherwise it will have to liquidate its operations and return the $200 million IPO proceeds to shareholders.

SEC filing – 8-K

 

Nabors Energy Transition Corp completes $276 million IPO

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Nabors Energy Transition Corp (NETC) has completed its upsized Initial Public Offering by selling 27,600,000 units at $10 apiece.



The SPAC or blank check company intends to acquire a company that is involved in energy transition such as alternative energy, energy storage, emissions reduction and carbon capture.

The sponsor of the SPAC is a company co-owned by Nabors Industries, a global leader in land-based drilling rigs and Tony Petrello, the current Chairman and CEO of Nabors.

In fact, all the management team of the SPAC are employed by Nabors including William Restrepo (CFO), Guillermo Sierra (VP – Energy Transition) and Siggi Meissner (President of Engineering and Technology).

The management team will not be paid a salary by the SPAC until it closes on a transaction. However, to me, it appears that there is plenty of scope for conflicts of interest. In the prospectus, NETC states that ‘potential conflicts with Nabors are naturally mitigated by the differing nature of the investments that Nabors would consider more suitable’.

In August, Nabors issued a press release that ‘it continues investment in energy transition with Quaise Inc’. It provided $12 million in financing to Quiase, a company developing millimeter wave drilling technology to access deep geothermal energy. That technology appears to be within the remit of the SPAC, even if the size isn’t.

https://www.prnewswire.com/news-releases/nabors-energy-transition-corp-announces-closing-of-276-000-000-initial-public-offering-including-full-exercise-of-underwriters-option-to-purchase-additional-units-301429394.html

 

 

 

Energy transition SPAC completes $175 million IPO

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Pyrophyte Acquisition Corp has completed its $175 million initial public offering (IPO). The blank check company has its head office in the River Oaks area of Houston.

The company is seeking targets involved in energy transitions. That could mean renewable power generation, energy storage, zero-emission transportation, carbon capture or zero/low-carbon industrial applications.



The chairman of the company is Dr. Bernard Duroc-Danner. In 1987 he was hired to start up the oilfield services business of EVI. 47 acquisitions later, he retired as Chairman and CEO of Weatherford in 2016. In 2018, he co-founded a start-up of an artificial intelligence software company with applications in wind renewable energy.

Sten Gustafson is the CEO. From 2012 to 2014 he was the CEO of ERA Group, the Houston-based helicopter company that was spun out of Seacor in 2013. Since 2018, he was served as the Chairman of Golden Energy Offshore, a Norwegian operator of offshore service vessels.

The CFO is Thomas Major who spent ten years at NOV, including five as Director of Corporate Development.

The company is the fourth Houston-based SPAC or blank check company to go public since the beginning of last week. You can read about the others here and here.

https://www.globenewswire.com/news-release/2021/10/26/2321254/0/en/Pyrophyte-Acquisition-Corp-Announces-Pricing-of-175-Million-Initial-Public-Offering.html

 

Two more Houston-area blank check companies go public

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Late last week, two more SPACs or blank check companies went public via an Initial Public Offering (IPO).

GoGreen Investments upsized its IPO and raised $240 million. The company is based in downtown Houston and is seeking companies in the clean/renewal energy space.

The company is led by CEO John Dowd, who is based in Massachusetts. He spent 14 years as a portfolio manager of the energy and natural resources sector funds of Fidelity Research and Management.

The CFO is Michael Sedoy, a former portfolio manager at various hedge funds on the east coast. He worked alongside Mr. Dowd, for a short period, at Sanford Berstein in New York

Newhold Investment II raised $175 million. The company is targeting businesses involved in advanced robotics, the Internet of Things, Software as a service with machine learning or new energy technologies.

The company is led by Kevin Charlton, who has taken a number of SPACs public in recent years. He has also worked for McKinsey, NASA and JP Morgan in his career.

One of the SPACs taken public was Newhold I which raised $150 million in July 2020 and took Boston-based Evolv Technology public in July 2021 in a deal that valued the business at $1.25 billion. Evolve is a leader in AI touchless security screening.

A third Houston-based SPAC, SportsMap Tech Acquisition went public earlier in the week.

https://www.prnewswire.com/news-releases/gogreen-investments-corporation-announces-upsizing-and-pricing-of-240-000-000-initial-public-offering-301405061.html

https://www.businesswire.com/news/home/20211020006140/en/NewHold-Investment-Corp.-II-Announces-Pricing-of-175-Million-Initial-Public-Offering

 

 

 

 

Houston E&P SPAC goes public in $150 million IPO

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CENAQ Energy Corp, a SPAC (otherwise known as a blank check company) based in the Galleria area, has completed its $150 million Initial Public Offering. It intends to buy E&P assets in North America.



Chairman John Connally is a veteran of many E&P companies such as Nuevo Energy (acquired by Plains Exploration for $945 million in 2004). Interestingly, he is also the Chairman of  Texas South Energy. This is an E&P company that trades over-the-counter and is based in the same office suite as CENAQ. In July, the Securities and Exchange Commission (SEC) revoked the registration of Texas South as the company hadn’t filed any quarterly or annual reports since March 31, 2019.

As an aside, one of the reasons for the delay was because LBB Associates was the auditor to Texas South. They had to resign in early 2020 as the majority partner, Carlos Lopez, was barred by the SEC for professional misconduct in a case unrelated to Texas South.

The CEO of CENAQ is Russell Porter. He spent 18 years at Gastar Energy. He resigned as CEO in February 2018 and received a severance payment of $3.5 million. In November 2018, Gastar filed for bankruptcy with $342 million of assets and $454 million of debt. It exited Chapter 11 three months later, having converted $350 million of debt into equity. The company was later sold to Chisholm Oil and Gas, based in Tulsa.

Mike Mayell is the CFO of CENAQ. He also serves as the CEO of Texas South. Mr. Mayell co-founded Meridian Resource and was its COO until 2008. Meridian was sold to Alta Mesa in 2009 for $27 million.

Houston area SPACS

CENAQ becomes the 13th blank check company based in the Houston area. You can see the complete list of Houston-area public companies here.

I’ve taken a couple of the blank check companies off the list recently as they have taken businesses public.

NewHold Investment has now taken Evolv Technologies public in a $1.3 billion transaction. Evolv is a security screening company based in Boston.

Landcadia Holdings III has now taken The Hillman Group public in a $2.6 billion transaction. Hillman, based in Cincinnati, distributes fasteners and work gear to Lowe’s, Home Depot and Walmart.

SEC filing – CENAQ IPO

Houston Ecommerce blank check company completes $175 million IPO

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Mercury Ecommerce Acquisition Corp has completed its $175 million Initial Public Offering. The Special Purchase Acquisition Corporation (SPAC), otherwise known as a blank check company, is seeking companies offering Software-as-a-Service (‘SaaS’) to enterprise customers.



The company has its head office in the Greenway Plaza area of Houston. The company is led by Chairman Blair Garrou, the co-founder and Managing Director of Mercury Fund, an early-stage venture capital firm. Previously, he was the Director of Operations for the Houston Technology Center and led the formation of the Houston Angel Network.

CEO Andrew White currently serves as a Special Limited Partner for Mercury Fund. He also his own investment vehicle where he has grown and sold a couple of businesses. He is the son of former Texas Governor, Mark White (1983-1987) and ran for the Democratic nomination for Governor in 2018, losing in the run-off to Lupe Valdez.

CFO Winston Gilpin is the founding CFO of Mercury Fund. He also is the co-founder of GSqr Consulting where he provides both fund administrative services to small venture funds and accounting services to Houston startups.

S-1 filing – Mercury Ecommerce

 

SPAC takes public battery company headquartered in Houston

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Tuscan Holdings Corp, a New York SPAC (Special Purpose Acquisition Company) has taken Microvast public in a transaction that values the company at $2.4 billion.



Microvast is a leading provider of vehicle battery technology for all types of vehicles. The company claims its batteries have longer range, quicker charging and longer lifespan than its competitors. It had initial success with electric buses, especially in China.  Its products operate in 160 cities in 19 countries.

The company was formed in Houston in 2006 by Yang Wu. Nominally, the company has its headquarters in Stafford where it has a 4,000 sq. ft. office. The main operations have been in Huzhou, China where the company has a manufacturing plant with 1.7 million sq.ft.  Mr. Wu had previously founded a water treatment company in Huzhou that he sold to Dow Chemical in 2006.

Last year the company signed a contract to be the exclusive supplier of batteries to CNH Industrial, the parent company of Iveco, a leading commercial vehicle brand. The batteries will be manufactured in the company’s Berlin plant that was opened earlier this year. The company also has an R&D contract with BMW.

US focus

The company is pivoting to the US and earlier this year bought a 577,000 sq.ft. building on 82 acres in Clarksville, TN with production scheduled for 2022.

As part of the de-SPAC transaction, Oshkosh Corporation announced it would make a $25 million investment in Microvast. Oshkosh recently won a $480 million contract to replace the USPS mail trucks with a combination of electric and low-emission internal-combustion-engine vehicles.

CEO Wu appears to be based in Hawaii, according to his LinkedIn Profile. CFO Leon Zheng is based in Houston and is a Texas A&M graduate. Dr. Wenjuan Mattis, the Chief Technology Officer, is based in Orlando.

Financial Projections

For 2020, the company had revenues of $107 million and an operating loss of $51 million. It is projecting revenues of $2.3 billion in 2025 with EBITDA margins of 20%. The transaction with Tuscan will leave it with $600 million. The company will use this to complete and/or expand all the manufacturing facilities.

The company will trade on the Nasdaq under the ticker symbol ‘MVST’.

SEC filing – Microvast goes public

 

 

Good Works management team completes its second SPAC IPO

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Good Works II Acquisition Corp, a Houston-based SPAC or blank check company, has completed its $200 million Initial Public Offering. It priced 20 million units at $10 each. The company will  trade on the Nasdaq.



The Company’s management team consists of Messrs. Fred Zeidman, Chairman, Douglas Wurth, Chief Executive Officer, and Cary Grossman, President. It’s the same team that completed a $150 million IPO in October 2020 for Good Works Acquisition Corp.

In March 2021, Good Works I announced it would take Cipher Mining Technologies, a bitcoin miner, public. It is still in the process of trying to close that deal, which has an enterprise value of $2 billion. Good Works I looked at a nanotechnology company and a genomic diagnostic lab before deciding on Cipher.

As with Good Works I, three officers have agreed to make available 750,000 founder shares (3% of the initial allotment) to be contributed to non-profit organizations, including those involved in the arts, human rights and the advancement of life sciences. These shares will be donated within six months of the IPO closing.

With Good Works I, it was Zeidman, Wurth and David Pauker, a non-exec director, who donated shares. This time it is Zeidman, Wurth and Grossman.

S-1 filing – Good Works II Acquisition Corp

All Houston SPACs to restate financials following SEC statement

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All 11 Houston-area Special Purpose Acquisition Companies (SPAC) have now announced that they will restate their financial results following the SEC staff statement on April 12.  In addition, three other Houston public companies that went public via a SPAC have also announced that they will restate.

On April 12, the SEC issued a staff statement that stated that some of the SPACs had accounted for warrants incorrectly in their Initial Public Offering.  They should have been accounted for as a liability, instead of equity. More background can be found in my post of May 2.

A few of the SPACs have already restated their financials. A summary of what has been disclosed so far is set out in the table below.

In addition the following local companies that went public via a SPAC have announced they will restate;

  • US Well Services (Nov 2018)
  • Target Hospitality (Mar 2019)
  • Golden Nugget Online Gaming (Dec 2020)

 

CompanyIPO DateIPO $mWarrantTaking publicValue $m
Delwinds Insurance AcquisitionDec-20$200$11
ESM Acquisition CorpMar-21$300n/k
Flame Acquisition CorpFeb-21$250n/k
Genesis Park Acquisition CorpNov-20$150$37Redwire$615
Good Works Acquisition CorpOct-20$150$9Cipher Mining $2,000
Industrial Tech AcquisitionsSep-20$75n/kArbe$573
Landcadia Holdings IIIOct-20$500$28Hillman Group $2,640
Landcadia Holdings IVMar-21$500$33
Newhold Investment CorpJul-20$150$22Evolv Technology $1,250
Peridot Acquisition CorpOct-20$300$18Li-Cycle $1,100
Peridot Acquisition Corp IIMar-21$360n/k