Are these the best 3 SPACs to buy in June 2021?
This month, we spotlight three special purpose acquisition companies (SPACs).
2020 was a manic year for global markets. Equity markets crashed in March before rebounding strongly, oil turned negative at one point, and special purpose acquisition companies – or SPACs – became the latest hot trend on Wall Street.
What is a SPAC?
In technical terms, a special purpose acquisition company (SPAC) is a non-operating entity that has been established with the sole intention of raising liquidity via an initial public offering (IPO) in order to acquire an existing private company.
According to PwC, like direct listings, SPACs have a number of benefits over a traditional IPO, including:
- Giving the acquired company access to capital markets
- The ability to become a listed company on a shorter timeline
- Potentially lower fees than those associated with a traditional IPO
Best 3 SPACs to watch in June
With the above considered, below we look at three recently revealed SPACs that investors and traders may want to keep an eye out for in June and beyond:
Pershing Square Tontine
VPC Impact Acquisition Holdings
Financial Services, Financial Technology
Virtuoso Acquisition Corporation
Pershing Square Tontine x UMG
Legendary hedge fund manager Bill Ackman last week announced that his SPAC – Pershing Square Tontine Holdings (ticker: PSTH) – is currently in discussions to purchase a 10% stake in Universal Music Group (UMG), in a deal worth an estimated $4 billion. At those price levels, UMG would be valued at roughly $42 billion.
This deal is a departure from the typical SPAC fare, as UMG will not go public through a combination with Tontine. Rather, UMG – which has already flagged its intention to list on Amsterdam’s Euronext later this year – will go ahead uninterrupted.
After raising $4 billion for Tontine Holdings in late-2020, Ackman has been relentlessly searching for an acquisition target. Commenting on why he is pursuing UMG, Ackman said:
‘Universal Music Group is one of the greatest businesses in the world.’
‘Importantly, UMG meets all of our acquisition criteria and investment principles as it is the world’s leading music company, with a royalty on the growing global demand for music. We are delighted to work with Vivendi on this iconic transaction, and look forward to its consummation.'
According to Tontine, UMG boasts a number of favourable attributes, including holding 'Number one industry market share in a stable competitive environment,' an 'iconic world-class management team' and a 'Massive and growing total addressable market.'
Ultimately, despite the novel structure of this investment, for those who have observed Ackman’s previous investments, this play should come as little surprise. Besides a penchant for consumer companies, Ackman has historically been attracted to complex financial structures.
Tontine saw its share price fall in response to the announcement of this deal last Friday, though the stock rebounded firmly on Monday, gaining 4.40% to last trade at $23.03 per share.
VPC Impact Acquisition Holdings x Dave
Last week VPC Impact Acquisition Holdings III (ticker: VPCC), which is sponsored by Victory Park Capital, announced it had entered into a definitive agreement to take the popular banking app – Dave – public via a SPAC.
Dave is a US-based banking application which is aimed at helping individuals avoid overdraft fees charged by traditional banks. The company touts over 10 million customers and is centrally focused on helping ‘customers with banking, financial insights, overdraft protection, building credit and finding side gigs.’
Commenting on the financial system which the company is seeking to disrupt, Dave CEO, Jason Wilk said:
‘We believe the legacy financial system has failed to deliver and today, more than 150 million people need our help to build financial stability. Dave is upending the banking industry with our suite of breakthrough financial products and making a meaningful impact on our customers’ lives.’
Following the completion of the SPAC transaction with VPCC, the company is expected to have a pro-forma equity value of ~$4 billion, some $375 million in cash on its balance sheet, and trade under the ticker DAVE.
VPCC last traded at $9.88 per share.
Virtuoso Acquisition Corporation x Wejo
Vehicle data start-up Wejo in late May announced it had agree to a SPAC merger with Virtuoso Acquisition Corporation (ticker: VOSO).
Following the completion of the deal, the company expects to have an enterprise value of approximately $800 million, implying a 2.5x FY24e sales multiple.
Described as a connected vehicle data company, Wejo aims to simplify the process of sharing and accessing connected car data – on a global level.
The company claims the insights which flow from this data have a host of uses, ranging from helping business develop new revenue streams, improving the safety of driving, to making it easier for drivers to find a parking spot.
Commenting on the deluge of data which the company deals with every day, Wejo Founder and CEO, Richard Barlow said:
'Wejo onboards and standardizes over 14 billion data points every day, directly from live connected vehicles. This vast, unique data set enables Wejo to deliver mobility intelligence products, as live streams, aggregated data and OEM applications.'
Moreover, as its recent investor presentation highlights, through its agreements with a number of OEMs – which include GM, Daimler, Nissan, Ford, Subaru and Honda, among others – Wejo currently has access to data insights from over 10 million live, connected vehicles. As with its lofty gross sales projections which we look at below, the company expects the number of live vehicles which it can draw data insights from to more than 10x by 2025.
From a financial perspective, management forecasts the company’s total addressable market to hit $61 billion by 2030 while the connected vehicle market as a whole is expected to move past $500 billion at the end of the decade. This coincides with the expectation that the number of connected vehicles will triple by 2030.
Off the back of these lofty projections, Wejo is forecasting FY25 gross sales of $1.39 billion against FY25 revenues of $764 million. That’s a big ask at current levels, with Wejo saying it booked total gross sales of $4 million and total net revenue of just $1.3 million – in FY20.
The company said it expected the SPAC deal to close during the third quarter of FY21, after which the company would trade under the ticker WEJO on the NASDAQ.
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