Popular but opaque, SPACs charge ahead in 2020.
Trending this year, SPACs are receiving widespread media and investor interest. On any given day, you can turn on CNBC and hear that all star fund manager Bill Ackman launched has a new SPAC. In fact, SPACs are even spawning more SPACS: take a look at Social Capital Hedosophia Holdings Corp. I, II, III, IV, V, and VI!
2020 YTD SPAC numbers have been widely reported, but it bears mentioning again:
- Over 200 new SPACs launched (350% increase YoY)
- About $74 billion raised in capital (540% increase YoY)
- Average IPO size $342m (150% increase YoY)
Investors love these vehicles - they represent a bet on the management team's skill with the potential for enormous rewards for early participants. If you like Ackman or you like an industry, you can be a part of the process of bringing a company to market. If you have a valuable private business, the blank check can get you to a public listing without the hassle of a traditional IPO.
But how much do you really know about a SPAC investment?
Blank-check companies have been around since the '80s, and as their name implies, there is no "there" there – it's a company with no financials, no business, and no history. Investors are limited to data they can gather about the management team and its past successes. These are qualitative metrics without a standardized structure or language surrounding them.
At idaciti, we're excited to present a solution to the structuring and research process regarding SPAC filings (and many other filings needed for research projects). We've designed our platform to encourage intuitive use, easy information parsing, and collaborative sharing. Our current clients use "research cards" to get assessment info faster than ever, with team-member comments overlaid on relevant filings, so nothing gets missed. A research card can reveal key insights as in the screenshot below:
When you know what you know, matters.
In the next chart, we examine the lifecycle of Draftkings, formerly Diamond Eagle Acquisition, from SPAC formation and IPO to Target Acquisition and Merger. First, the initial S-1 reveals the management team and industry target. The following periods involve 10-Q filings with little meat on their bones, as there is still no actual business to report on (except, of course, the fees paid to the management).
Until the S-4 filing, where a target company is announced, the stock price stays typically around $10. You can see two significant moments of speculation in the value of the SPAC – when the S-4 reveals the target company and when the shareholder vote results in a merger. Timing is critical at every stage.
Technology can make this process easier for you.
In the early stages, qualitative evaluation of management teams is notoriously difficult! idaciti can search, compare, and highlight critical language from early statements, reducing the noise and bringing the value proposition to the center. You cannot begin to evaluate until you know what you are evaluating and where it sits in relationship to others.
In the middle period, the timing of analysis on the underlying target financials is key. Our clients maintain a connection to the SPAC throughout the process! With alerts and technology-based team collaboration, you can get the structured data faster, evaluate more closely, and be in charge of the decision-making process.
At the time of the merger, a new pain point can emerge. The stock ticker will change! In the example above, DEAC becomes DKNG, and it's easy to lose the thread of the stock at the worst possible moment. Since idaciti tracks these companies using SEC-provided CIK codes from Day One, our clients and partners never miss a ticker change or lose track at a critical moment.
How many of these hundreds of new SPACs will succeed, acquire a reliable target, take it public, and grow long term? Only time will tell. But not that much time. SPACs typically have a 2-year time limit to find a target and merge. Now is the critical moment to know what you need to know and make your decisions.
We at idaciti know better than anyone that your data providers represent an important link in the chain of decision-making. We believe that new technology, thought leadership, and ease of use all contribute – can your data provider do all that? Don't settle for a legacy provider and get left in the dust on SPAC valuation.
Join us for a free demo and see what else idaciti offers to the well-informed investor. With our technology and your vision, the future's looking bright.