Are these the best SPACs to invest in for April 2021?
This month, we spotlight five popular special purpose acquisition companies (SPACs).
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.
In this article, we examine five SPACs worth considering in the month ahead. They are namely Reinvent Technology Partners Z, Revolution Acceleration Acquisition Corp, SVF Investment Corp. 3, CITIC Capital Acquisition Corp and Malacca Straits Acquisition.
Reinvent Technology Partners Z (NYSE: RTPZ)
Home insurance group Hippo Enterprises announced last month that it would be merging with LinkedIn co-founder Reid Hoffman’s SPAC entity Reinvent Technology Partners Z (RTPZ) in a deal that values its business at US$5 billion.
The transaction, which has been unanimously approved by the Boards of Directors of both Hippo and Reinvent, is expected to close in mid-2021, subject to the satisfaction of customary closing conditions.
The combined company is expected to have approximately US$1.2 billion in cash at closing, including up to approximately US$230 million of cash held in Reinvent’s trust account from its initial public offering on 23 November 2020.
The transaction is further supported by a US$550 million PIPE (private investment in public equity) at US$10 per share that was led by current investors (including Dragoneer, Lennar and Ribbit), top tier mutual funds and Reinvent Capital.
After the closing of the merger, Hippo’s existing stockholders are expected to own approximately 87% of the pro forma combined company.
Hippo has grown historical total written premiums by 69% over the last three calendar years, and launched in 12 new US states in 2020 alone. The company has an average annual premium of US$1,200, an average one-year retention rate of 87%, and an overall net promoter score of 75 out of 100, twice the industry average in 2020.
RTPZ believes in structuring its transactions to ensure maximum long-term alignment with the company in which it invests. Consistent with this approach, Reinvent and Hippo have agreed to a long-term lock-up on founder shares for up to two years, and a robust earnout structure with full vesting not realized until the share price reaches US$20 per share.
Revolution Acceleration Acquisition Corp (NASDAQ: RAAC)
E-commerce artificial intelligence (AI) software developer Berkshire Grey entered into a definitive agreement with Revolution Acceleration Acquisition Corporation (RAAC) on 24 February 2021, to create a leading publicly listed robotics and automation solutions company with a post-transaction equity value of up to US$2.7 billion.
Founded in 2013 by current CEO Tom Wagner, also the former Chief Technology Officer at iRobot, Berkshire Grey is a pure-play robotics company offering fully integrated, AI-based software and hardware solutions to automate business operations in warehouses and logistics fulfilment centres.
The company says it has ‘achieved strong momentum since emerging from stealth mode in 2018, propelled by the accelerating consumer shift toward e-commerce and the resulting need for retailers to adapt their supply chain and warehouse operations to meet consumer demands for better selection, lower prices, and faster shipping’.
Order backlog and ongoing negotiations with the Berkshire Grey’s current customers, which include multi-national retail, e-commerce and package logistics companies, provide meaningful visibility into projected revenues for 2021 and 2022.
Additionally, the firm intends to grow its commercial organisation to meet increasing demand for its services, deepen its relationships in key industry sectors, and build new, value-added services.
With roughly 5% of warehouses being automated today, the market opportunity for Berkshire Grey’s solutions remains wide open.
Founded by John Delaney and Steve Case, RAAC was launched in December 2020 to focus on value creation opportunities at the intersection of two important trends, namely public policy and technological innovation.
RAAC CEO John Delaney will remain on the Board of Directors of the combined company upon completion of the transaction.
SVF Investment Corp. 3 (NASDAQ: SVFC)
SVF Investment Corporation. 3 (SVFC) is the fourth SPAC launched by Softbank targeting technology-based businesses.
The blank cheque company raised US$280 million through the sale of 28 million shares at US$10 each on 09 March 2021. Unlike the average SPAC launch, it did not offer units with warrants attached.
According to Nasdaq, the stock may raise an additional US$150 million at the closing of an acquisition (or up to US$200 million at the forward purchase investors' election) pursuant to a forward purchase agreement with an affiliate of the sponsor.
SVFC is sponsored by SoftBank Investment Advisers (SBIA), the investment manager to the SoftBank Vision Funds.
The company was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganisation, or similar business combination with one or more businesses in a technology-enabled sector.
This includes, but is not limited to: mobile communications technology, artificial intelligence, robotics, cloud technologies, software broadly, computational biology and other data-driven business models, semiconductors and other hardware, transportation technologies, consumer internet, and financial technology.
The company is led by Ioannis Pipilis, Managing Partner for SBIA, and Navneet Govil, the CFO of SBIA. Michael Carpenter and Michael Tobin will serve on the board as independent directors.
CITIC Capital Acquisition Corp. (NYSE: CCAC)
CITIC Capital Acquisition Corporation. went public on 11 February 2020, pricing 24 million units at US$10 per unit.
The share sale, which raised US$240 million at launch, had been upsized from an initially planned 20 million units.
CCAC’s market capitalisation currently stands at roughly US$350 million.
CCAC, according to its website, is a blank check company incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganisation or similar business combination with one or more businesses.
While the company may pursue an initial business combination target in any business or industry, the company intends to search globally for companies in the energy efficiency, clean technology and sustainability sectors that it belives can be positioned for success in China, as well as other markets in Asia and beyond.
Of the stock’s ownership, institutions comprise the largest percentage, with 11% of CCAC stocks owned by hedge funds as of February 2021. The company’s top 12 investors own 52% of all shares, with retail investors holding a 28% stake.
CITIC Capital Holdings Limited is currently the company's largest shareholder with 15% of shares in holdings. Hudson Bay Capital Management LP and Polar Asset Management Partners Inc. are the second and third largest shareholders, owning 6% and 5% of shares respectively.
Malacca Straits Acquisition (NASDAQ: MLAC)
Asia Vision Network (AVN), the holding company for Indonesia’s fastest growing OTT service Vision+, has entered into a definitive business combination agreement with Malacca Straits Acquisition Company Limited (MLAC), a publicly traded SPAC company, for a pro-forma enterprise value of US$573 million.
The merger will also result in approximately US$135 million of net proceeds to AVN’s balance sheet, assuming that there are no redemptions by MLAC’s public stockholders or purchase price adjustments.
AVN, part of the MNC Group, will continue after the business combination as a new Indonesian US-listed holding company and is expected to trade on NASDAQ. The transaction is expected to close in late Q2 or early Q3 2021.
Under terms of the transaction, each MLAC shareholder will receive an American Depository Receipt (ADR) representing one AVN ordinary share in exchange for each MLAC ordinary share that they hold; and each Malacca Straits warrant will become a warrant to purchase one ADR.
Vision+, often referred to as the ‘Netflix of Asia’, is described as having the strongest OTT content proposition in Indonesia, having access to exclusive rights of all MNC Group’s Free-To-Air channels and content library of more than 300,000 hours, of which more than 100,000 hours are VOD ready.
With current OTT media penetration at only 2%, AVN is strategically positioned in the early stages of a durable growth cycle in the world's fourth largest country by population with a gross domestic product of over US$1 trillion and average population age of 31 years old.
According to the press release, continued strong demand for local content among a fast-growing middle class ‘has led Vision+ growth to far outpace international players such as Netflix and Disney+ in the Indonesian market’.
How to trade SPAC stocks with IG
Are you feeling bullish or bearish on these SPAC stocks?
Either way you can buy (long) or sell (short) these assets using IG's world-leading trading platform in a few easy steps:
- Create a live or demo IG Trading Account, or log in to your existing account
- Enter <company name (i.e. Reinvent Technology Partners> in the search bar and select the instrument
- Choose your position size
- Click on ‘buy’ or ‘sell’ in the deal ticket
- Confirm the trade
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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