Tag Archives: SPAC

Another Houston SPAC dissolves

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Another Houston SPAC (Special Purpose Acquisition Company) has dissolved and return the monies raised during its IPO to the shareholders. This time, it is Newhold Investments II which went public in October 2021 in an IPO that raised $175 million.  In February, three Houston SPACs dissolved.



The company was targeting businesses involved in advanced robotics, the Internet of Things, Software as a service with machine learning or new energy technologies.

In a press release, the company said they looked at over 130 companies and signed over 30 NDAs. It conducted due diligence on several. The company came close to announcing a merger partner in April 2023 but market conditions prevented the company from securing the minimum cash needed to proceed.

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

One of the SPACs taken public was Newhold Investments I. It raised $150 million in July 2020 and took Boston-based Evolv Technologies public in July 2021 in a deal that valued the business at $1.25 billion. Evolve is a leader in AI touchless security screening. However, its current enterprise value is only $335 million.

SEC filing – Newhold Investments II

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

Two Houston companies taken public by SPACs

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Verde Clean Fuels, a Houston-based company that aims to supply gasoline derived from renewable feedstocks, has been taken public by CENAQ Energy Corp, a SPAC also based in Houston.



Verde owns proprietary technology that is designed to produce gasoline from waste feedstocks (e.g. food waste, paper, grass, leaves and other greenwaste) that are otherwise landfilled. It has a demonstration facility in New Jersey. The company is conducting front-end engineering design for its first commercial facility near Phoenix, Arizona. It expects to spend $130 million in capex and complete the plant in the second half of 2024. Further plants are planned in Bakersfield, CA and Odessa, TX

The transaction values Verde at an enterprise value of $250 million or 1.8 times projected 2025 EBITDA and leaves $220 million of cash on the balance sheet to fund the initial capex and operating losses.

CEO Ernie Miller has been with the Verde (or its predecessors) since 2017. He initially joined as CFO and Chief Commercial Officer. Prior to that, he spent 12 years as CFO at Rodeo Resources, an E&P and midstream company. Prior to that, he spent 5 years at Calpine, organizing financing for cogeneration power plants.

The company is conducting a search for a Chief Financial Officer.

The stock (ticker VGAS) is up slightly since it started trading on February 16.]

Verde Clean Fuels – Investor Presentation

Rocket to the Moon

Another Houston company, Intuitive Machines, was also brought to market last week by a SPAC. The company is developing space infrastructure components such as lunar vehicles. The original $815 million deal was announced back in September. After going public at $10 per share on February 14, the stock took off like a proverbial rocket, reaching $46 just two days later. It is currently trading just under $38. The company has not issued any press releases that can account for the run-up in the stock.

Bad news for Good Works

Not such good news last week for Good Works II, a Houston SPAC. Its $723 million deal to take Direct Biologics, an Austin biotech start-up, collapsed. The deal was originally announced in October. No reason was given for the failure.

 

Houston Drilling Tools company to be taken public by SPAC

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Drilling Stabilizer

Drilling Tools International (‘DTI’), which has its head office in the Westchase area of Houston, is being taken public by ROC Energy Acquisition Corp, a Dallas-based SPAC. The transaction values the business at $319 million.



DTI manages and maintains over 65,000 rental tools and drilling equipment across 22 service and distribution centers in North America and Europe. Its main machine and repair center is in Broussard, Louisiana.

The business was founded in 1984 as Directional Rentals. In 2012, Hicks Equity Partners, also based in Dallas, acquired the business. Since then, the business has made 7 acquisitions and revenue has grown to an expected $164 million in 2023.

Adjusted EBITDA for 2023 is forecast to be $58 million (35%). That’s a misleading metric for any rental business that has high capex needs. Free cash flow, defined as EBITDA less capex is forecast to be $19 or 11%.

The transaction will leave DTI with no debt and $217 million of cash on the balance sheet to fund future acquisitions.

Wayne Prejean has been the CEO at DTI since 2013. He has a long career in directional drilling companies. In 1999, he founded Wildcat Services before selling it to National Oilwell Varco in 2004. Mr. Prejean stayed with NOV after the sale.

David Johnson joined as CFO, also in 2013. He has been the CFO at a number of drilling companies prior to that.

ROC went public in December 2021 in a $150 million IPO. Its original intention was to focus on non-operated oil and gas properties (i.e. where the E&P company owns the well but does not manage the operations of the well).

ROC may have had to pivot after Granite Ridge Resources, a business that owns non-operated assets, was taken public in October 2022 by a rival SPAC chaired by Paul Ryan, the former speaker of the House of Representatives. Since going public, Granite’s stock is down 30%

The transaction is expected to close in the second quarter of 2023.

DTI – Investor Presentation

 

 

Houston SPAC to take Infrared Cameras public

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Sportsmap Tech Acquisition Corp, a Houston SPAC (Special Purpose Acquisition Company) is to take Infrared Cameras Holdings (“ICI”) public in a $100 million deal.



ICI designs and develops thermal cameras and sensing hardware as well as a proprietary subscription software used to analyze thermal data points. Commercial applications include the detection of methane leaks in wells and pipelines and monitoring of conveyor belt equipment in warehouses. The business presumably got a boost with temperature screening during COVID.

ICI was formed in 1995 and is based in Beaumont, Texas. CEO Gary Strahan has lived there since he was two. He started out as a welder and diver, performing underwater non-destructive testing and then worked for companies developing infrared cameras before starting ICI.

No financial details about ICI were disclosed in today’s announcement.

Sportsmap went public in October 2021 with a $100 million IPO. The business aimed to make an acquisition in sports technology such as wearables, data analytics, new methods of fan engagement, and new esports and gambling platforms. Oh Well!

A couple of names well known to Houston sports fans are also Directors of Sportsmap.

  • Reid Ryan, former President of the Houston Astros. He is the son of Nolan Ryan.
  • Oliver Luck, former General Manager of the Houston Dynamo and former CEO of the Houston Sports Authority.  He is the father of Andrew Luck, the number one draft pick in 2012.

The deal should close in the first half of 2023. Under the terms of its IPO, Sportsmap has until April 2023 to complete a deal, otherwise it has to return the money it raised to investors.

SEC filing – 8-K Sportsmap ICI

 

Houston SPAC to take biofuels refinery company public

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Port Westward, Oregon

Industrial Tech Acquisitions II, a Houston SPAC, has agreed to take NEXT Renewables Fuels public in a transaction worth $530 million. NEXT, founded in 2016, is also based in Houston. Upon closing, the business will be renamed NXTClean Fuels.

NXT is in the process of developing a 50,000 barrel-per-day refinery in Port Westward, Oregon that will produce renewable diesel (‘RD’) and sustainable aviation fuel (‘SAF’).

Renewable Diesel

Renewable diesel is made from feedstock products such as vegetable oils, animal fats, used cooking oil and distillers corn oil. It uses the same source oils and fats as biodiesel. However, the refining process is different from biodiesel. The process is more capital-intensive, but RD is chemically equivalent to petroleum diesel and can be transported in petroleum pipelines.

Likewise, the refining process to make SAF is similar to regular jet fuel, except for the source feedstocks.

Construction of refinery

NXT expects the permitting of the Port Westward refinery to be granted by late 2023 with initial operations starting in mid-2026. The construction cost is currently $2.7 billion. (NXT’s own website shows a start date of 2024 and a construction cost of $2 billion, though this date and cost appear to be from June 2021).

The company aims to select an EPC (Engineering, Procurement and Construction) Contractor by the end of the year. Fluor is the frontrunner, as they have performed the engineering work so far for the company.

Supply and Offtake Agreements

NXT has an agreement with BP, who will supply 100% of the feedstocks for at least 5 years. It also has offtake agreements with Shell and Chevron. United Airlines, through its venture arm, has invested an initial $2.5 million in NXT. This investment could rise to $37.5 million, assuming certain milestones are met.

Forecast revenues

In its first full year of operation in 2027, the company is projecting revenues of $3 billion and EBITDA of $1 billion.  Half of the revenue will be generated from the sale of credits that arise from the Renewable Fuel Standard, enacted by Congress in 2005.

In the transaction, NXT will have an enterprise value of $530 million. It will also have $156 million of cash on its balance sheet.

Management

The CEO of NXT is Christopher Efird, an entrepreneur and investor who has led, or co-led the investment into 29 growth stage businesses. Many of those later went public.

David Kane, based in Las Vegas, currently serves as the CFO of NXT, though his title is Senior VP and Controller.  He has been the CFO at a number of small and medium sized companies in California and Nevada.

2nd SPAC run by Scott Crist

Industrial Tech Acquisitions II went public in January 2022. It raised $173 million and is the 2nd SPAC run by Scott Crist. The first SPAC took Arbe Robotics public in October 2021. Arbe is an Israeli company developing 4D automotive imaging radar. Arbe’s shares are trading at $4.00, compared to $8 when it went public.

SEC filing – Investor Presentation

Houston SPAC buys California assets from Exxon

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Flame Acquisition Corp, a Houston-based SPAC (Special Purpose Acquisition Corp) has agreed to buy the Santa Ynez oilfield from ExxonMobil. The business will be renamed Sable Offshore. (Technically, Exxon are selling the business to Sable Offshore, a company set up by Mr. Flores last year. In turn, Flame are buying Sable Offshore).



Flame completed its $250 million IPO in February 2021. The company is led by CEO and Chairman James Flores, the former CEO of Sable Permian Resources and prior to that, CEO of Plains Exploration and Production. The CFO is Gregory Patrinely, the former CFO of Sable Permian. He also worked in the Oil and Gas division of Freeport-McMoRan, where Mr. Flores also worked for a time.

The Santa Ynez oilfield consists of 3 offshore platforms located in federal waters 12 miles off the coast near Santa Barbara and an onshore processing facility at Las Flores Canyon.

The offshore field had to stop production in 2015 after a corroded onshore pipeline that runs parallel to US Highway 101 ruptured, releasing 2,934 barrels of oil into the ocean. Plains All American (a separate company to Plains Exploration and Production)  were the owners of the pipeline at the time. In 2020, Plains were fined $60 million in relation to the spill.

Last month, ExxonMobil bought the pipeline from Plains and has now agreed to sell it to Sable, who will be responsible for repairing and maintaining the pipeline.

The assets are being acquired for $643 million. However, most of this is being financed by Exxon who are issuing a $623 million loan to Sable. The loan has a 10% interest rate and will not be repaid until the earlier of 5 years or 180 days after production is restarted. I

Sable is targeting a production start date for the Santa Ynez field of January 2024 and is estimating it will cost $172 million to repair the pipeline and get the offshore platforms ready. That money will effectively come from the cash that Flame raised in its IPO. Sable is also looking to raise a further $300 million in equity to provide it with cash reserves in case of delays.

Sable believes that they can repair the pipeline quickly by following the processes outlined in the the consent degree that Plains agreed to in its March 2020 settlement. It’s not clear to me how or whether the Californian state authorities can object or delay the repairs.

If production does not restart by January 2026, ExxonMobil has the right to take back the assets.

[EDITED 11-10-22 to make clear that Plains Exploration and Production, the former employer of Mr. Flores, is a separate company from Plains All-American).

Flame – Investor Presentation

 

Houston Space Infrastructure company to go public

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[Update 2-14-23 – The deal has been completed]

Intuitive Machines (‘IM’), a Houston space infrastructure company, has agreed to be taken public by Inflection Point Acquisition Corp, a Manhattan-based SPAC.

The company is located near NASA and has recently been awarded a number of contracts with NASA’s Artemis program, which aims to return astronauts to the Moon by 2024.



IM is involved in 4 main segments

  • Lunar landing vehicles
  • Lunar data services
  • Orbital services (e.g. satellite servicing, debris removal)
  • Space infrastructure (power plants, human habitation systems)

IM was founded in 2013 by CEO Stephen Altemus, Kam Ghaffarian and Tim Crain.

  • Mr. Altemus is the former Deputy Director of NASA’s Johnson Space Center.
  • Mr. Ghaffarian is the Chairman of IM and has co-founded a number of space companies, including NASA contractor Stinger Ghaffarian Technologies, which was sold to KBR for $355 million in 2018.
  • Dr. Crain is IM’s Chief Technology Officer and worked at NASA for 12 years.
  • CFO Erik Sallee joined in April 2021 and was formerly the Corporate Controller at Blue Origin.

The company expects to have $102 million of revenue this year and has $153 million in backlog for 2023. The big jump is in 2024 when revenues are projected to be $759 million and the business will make a small EBITDA profit.

The transaction values the business at $815 million enterprise value (2.8 x 2023 revenue) and will leave the business with $338 million cash on hand to fund growth.

The deal is expected to be completed in the first quarter of 2023.

Just last week, Nauticus Robotics, another Houston company with strong NASA connections, was taken public by a SPAC.

Intuitive Machines – Investor Presentation

 

 

 

Foxo Technologies goes public via Houston SPAC

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Delwinds Insurance, a Houston SPAC, has completed its business combination with Foxo Technologies. As a result, the company has been renamed and is now based in Minneapolis.

Foxo is developing proprietary saliva-based epigenetic biomarkers with a plan to create simper, smoother, non-invasive underwriting of life insurance. Currently, underwriting involves lengthy timelines and invasive blood and urine specimen requirements.



Epigenetic biomarkers are chemical modifications, called DNA methylation that alter gene expression from external stimuli such as lifestyle and environment. The company plans to use automated machine learning to identify patterns of epigenetic biomarkers that correlate to health and wellness (e.g tobacco use, hypertension, alcohol abuse etc).

Foxo started in 2019.  The company is projecting its first revenues in 2023 with positive EBITDA during the following year. The transaction values Foxo at $300 million and leaves it with $194 million in cash to fund its growth.

Delwinds went public in December 2020 in a $200 million Initial Public Offering.  It planned to target businesses in insurance technology so the deal for Foxo (announced in February 2022) definitely met that criteria. Delwinds had 18 months from its IPO to complete a deal, otherwise it would be wound up and the cash returned to investors. In May, it received a 3-month extension to Sept 15.

SEC filing – Foxo completes Delwinds deal

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