Tag Archives: SPAC

Good Works management team completes its second SPAC IPO

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

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

Two local companies to restate financials as SEC bursts SPAC bubble

For the last few months, there has been a surge of blank check companies or SPACs (Special Purpose Acquisition Companies) going public. However, it has gone very quiet since early April as the Securities and Exchange Commission (SEC) has now weighed in.



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.

Certain contracts, such as warrants, may be settled in the stock of the entity. They can be classified as equity, rather than as a liability, but it depends on the fact pattern. For instance, an equity-linked financial instrument must be indexed to the entity’s own stock in order to qualify for equity classification.

For some SPACs, the warrants included a provision that in the event of a tender or exchange offer made to and accepted by holders of more than 50% of the outstanding shares of a single class of common stock, all holders of the warrants would be entitled to receive cash for their warrants.

In other words, in the event of a qualifying cash tender offer (which could be outside the control of the entity), all warrant holders would be entitled to cash, while only certain of the holders of the underlying shares of common stock would be entitled to cash. Therefore the tender offer provision would require the warrants to be treated as a liability measured at fair value.

Local companies restating

Among a slew of SPACS that have filed that they will restate their financial statements are two Houston-area companies, Landcadia Holdings III and Genesis Park Acquisition Corp.

Landcadia III (a Tilman Fertitta SPAC) went public in October 2020, raising $500 million. In January, it agreed to take The Hillman Group in a deal valued at $2.64 billion. The company has already filed its restatement. At December 31, 2020 it increased its liabilities by $56 million. It recorded the offset as a loss (non-cash change in fair value of warrant derivative liability).

Genesis Park went public in November 2020 in an $150 million IPO. In March, it agreed to take Redwire, a space technology company, public in a $615 million deal. Genesis has not yet quantified the amount of the restatement.

[UPDATE 5/8/21]

Two more Houston-based SPACS have restated their financial results.

  • Good Works Acquisition Corp ($150 million IPO) booked a $9 million warrant liability and a loss of $1.2 million on the fair value).
  • Peridot Acquisition Corp ($300 million IPO) booked an $18 million liability and $22.5 million loss on the fair value.

Good Works has announced plans to take Cipher Mining public while Peridot is doing the same with Li-Cycle.

SEC and Financial projections

The SEC is also weighing a crackdown on the projections made when a SPAC takes a private company public (also called a de-SPAC). In a public statement made on April 8, John Coates, the acting SEC Director, Division of Corporation Finance stated that the heightened scrutiny placed on projections in a traditional IPO should also apply to the de-SPACs. While this is not yet a public policy, it is clear where the SEC is headed.

 

 

 

Houston SPAC to take space technology company public

Credit: Made in Space (a Redwire company)

Genesis Park, a Houston-based Special Purpose Acquisition Company (SPAC), has agreed to take Redwire, a space technology company, public.



Genesis Park went public in November 2020 in a $150 million IPO.

Redwire, is based in Jacksonville, FL and manufactures space-capable robotics, solar arrays and antennas, and other equipment used in space. It plans to manufacture and assemble components in-space using 3D printing. The company was formed in June 2020 from the merger of two companies, with backing from AE Industrial Partners. Since then, it has made five more acquisitions.

Redwire becomes the seventh space venture in the past year to announce a SPAC deal. It had revenues of $120 million in 2020 and is currently cash flow positive. By 2025, it expects to grow to $1.4 billion. The transaction values the company at $615 million enterprise value.

Its CEO, Peter Cannito, was previously the CEO of Polaris Alpha, a high-tech solutions provider that developed systems for the Department of Defense. He’s also spent 12 years working for PE-backed companies in the defense, technology and government services market.

Jonathan Baliff, the CFO of Genesis and former CFO at Bristow Group, will join the Board of Redwire as a non-executive director.

The deal is expected to close by June 2021.

Investor Presentation – Genesis Park Redwire

Third and Fourth James Graf blank check companies file for IPOs

Not to be outdone by Tilman Fertitta, James Graf has also filed initial public offerings for his third and fourth SPAC (also known as a blank check company). The second ($225 million) filed to go public two weeks ago.



Graf Acquisition Corp III will be a $300 million IPO, while Graf Acquisition IV will be a $150 million IPO. All three will have the same management teams and objectives and be based in The Woodlands.

Graf Acquisition Corp I ($244 million IPO Oct 2018) completed its initial business combination with Velodyne Lidar in September 2020 for $1.5 billion.

Mr. Graf has also been involved in several other SPACs

  • Platinum Eagle Acquisition Corp ($325m IPO Jan 2018) – reverse takeover of Houston-based Target Hospitality for $1.3 billion in Mar 2019.
  • Double Eagle Acquisition Corp ($500m IPO Sept 2015) – combined with William Scotsman for $1.1 billion in Nov 2017.
  • Silver Eagle Acquisition Corp ($325m IPO July 2013) – combined with Videocon d2h for $273 million in March 2015.
  • Global Eagle Acquisition Corp ($190m IPO May 2011) – combined with Global Eagle Entertainment in Jan 2013.

S-1 filing Graf Acquisition III

S-1 filing Graf Acquisition IV

Houston blank check company finds acquisition target

Houston blank check company, Peridot Acquisition Corp, has agreed to buy Li-Cycle for $1.1 billion in a reverse takeover. Li-Cycle is a lithium-ion battery recycling company, based in Toronto.



Peridot went public in September 2020 with the aim of finding an acquisition in the environmental infrastructure or renewables sector, so Li-Cycle definitely fits the bill.

Li-Cycle aims to recycle electric vehicles batteries. In addition to end of lifecycle recycling, 5%-10% of battery production is rejected as waste during the manufacturing process. As EV production ramps, Li-Cycle sees a big and growing market. It uses a non-thermal process to recycle the batteries, allowing it to recover 95% of the battery mass.

Li-Cycle is still in a start-up phase. It currently has three locations in North America that shred and mechanically separate batteries. The company is also developing a hub in Rochester, New York that will produce, at scale, lithium carbonate, Nickel Sulphate and other high-grade minerals for resale.

It has signed 40 commercial contracts with suppliers, including over $900 million in contracted off-take.

The deal values Li-Cycle at 10 times 2023 projected EBITDA. At close, the business will have $566 million in cash on hand. That will allow Li-Cycle to fund the capital expenditures required to complete its business plan.

The combined company will be led by Li-Cycle CEO Ajay Kochhar. Fellow co-founder Tim Johnson will be the Executive Chairman. Peridot CEO Alan Levande will join the Board, as will Scott Prochazka, ex-CEO of Centerpoint Energy.

SEC filing – Peridot Li-Cycle acquisition

 

Two more Houston blank check companies file for IPOs

On Friday 12 February, a record 28 blank check companies filed for Initial Public Offerings (IPO), including two old favorites in Houston. Tilman Fertitta filed for his 4th blank check company, Landcadia Holdings IV, while Graf Acquisition Corp filed their 2nd.



In case you are wondering why Friday was so popular it’s because it was the last day a company with a calendar year-end can file for an IPO using a September 2020 balance sheet.

Landcadia and Graf History

Landcadia Holdings IV filed for a $500 million IPO. As before, the shareholders are Tilman Fertitta and Jefferies. As before, they are seeking companies that operate in the consumer, dining, hospitality, entertainment and gaming industries.

  • Landcadia III just went public in October 2020 and raised $500 million in its IPO. Last month it agreed to buy The Hillman Group for $2.64 billion in a reverse takeover.
  • Landcadia II raised $275 million in May 2019 and acquired Golden Nugget Online Gaming (a Fertitta company) in December 2020.
  • Landcadia I raised $250 million in June 2016 and acquired Waitr in November 2018.

Graf Acquisition Corp II filed for a $225 million IPO, same as the first Graf IPO that was completed in October 2018. The CEO is James Graf. Graf I completed its reverse takeover of Velodyne Lidar in September 2020.

Popularity of SPACs

Special Purpose Acquisition Companies (SPACs) or blank check companies as they are also known, have really taken off in the past couple of years, mainly because of the disadvantages in the traditional IPO route where the process is long (6-7 months) and the valuation (i.e. price) at completion is uncertain.

Furthermore, the investment bankers like their IPOs to be heavily oversubscribed and for the share price to ‘pop’ on the first day of trading. But that means that the selling shareholders have effectively given up part of their returns to the new shareholders.

In contrast, a blank check company can go public in 2-3 months and then spend the next few months negotiating a deal in secret with a potential target company. In this way, both the original sponsor and the shareholders of the target can generate a better return.

S-1 Landcadia Holdings IV

S-1 Graf Acquisition Corp II