SPAC Market Review – August 2022

by | Sep 6, 2022

Stop if you’ve heard this before, but the state of the SPAC market remains largely unchanged over the course of the last few months. While August didn’t bring about any major breakthroughs, it was a slightly more active month than we saw in July. Then again, as is typical in other corners of Wall Street, we could be gearing up for a much more active September.

Where do things stand? Still a massive glut of SPACs searching for deals and waiting to close, setting up for a flurry of extension votes and ultimate liquidations. By the numbers:

  • 567 SPACs looking for deals, 112 announced deals that are waiting to close
  • Over 300 SPACs are set to mature over the next 6 months
  • Average pre-deal common is trading at $9.93 and average pre-deal warrant is just $0.12

SPAC Merger Activity

Source: Boardroom Alpha

August started off with a flurry of announced deals and wound up being the most active month for new DAs since December of 2021, right before things started to get real ugly for SPACs. Overall 19 new DAs is a positive sign for the market – traditional IPOs are shut right now and many companies want access to the public markets. Deal valuations are on the smaller size than during the SPAC heyday (just two > $1B this month) and we’re seeing a larger amount of deals in the energy space.

August SPAC Deal Announcements

Accompanying the DAs were also another slew of terminations, 10 of them in fact. A couple of them were contentious: Blackstone refused to pay $200k to extend Ackrell SPAC Partners (ACKIT) life and ACKIT was ultimately forced to terminate the deal and liquidate, and Brivo / Crown PropTech Acquisitions (CPTK) have a potential court battle in the making.

Terminated SPAC Deals in August

Source: Boardroom Alpha

Kicking the Can Down the Road

Although 19 new DAs is welcome and higher than recent months, it’s still quite obvious that it is way below the needed pace. The latest phenomena to take over SPACs is a proliferation of extension votes, SPACs looking to buy (well in some cases for free) more time to complete a business combination. There are already 16 SPACs lined up to have an extension vote in September and 3 have already finalized plans for an October vote date.

Source: Boardroom Alpha

That being said, not all SPACs want to stay in the game, and many are throwing in the towel. 7 SPACs officially liquidated this month and another 3 have confirmed that they will liquidate in September. This pace is hugely accelerated vs. last year, and only looks to pick up – particularly with the huge maturity wall that is approaching.

SPAC IPOs – Signs of Life

While July brought the complete goose egg (not a single IPO) there was a flutter of life in August, with 4 new issues hitting the tape. IPO issuance YoY remains significantly down relative to 2021 which, of course, was by far and away the largest in the history of SPACs.

The 4 new issues totaled just $358M and 3/4 were underwritten by EF Hutton, as most of the major banks have taken a step back from SPACs amidst the market turmoil and uncertainty from the SEC.

So, where’s the value?

Disclaimer (and not investing advice), that SPAC warrants can be an extremely risky play. Should a SPAC liquidate, there are no redemption benefits for warrants and they will expire worthless. On the other hand, warrants are down about 80% overall this year and present a massive upside at current levels. Buying SPAC units (which typically have warrants attached) or warrants overall can provide meaningful upside:

  1. Units: will get the benefit of rising rates and and interest associated with the trust account, plus the upside potential of warrants and redemption backstop on your commons
  2. Warrants outright: big risk/reward proposition

If you believe that “fair value” of a warrant for a company that successfully DeSPACs is ~$1 then the current warrant levels should have you very excited. Cheap warrants represent the ultimate risk, could be a 5-10x trade or expire worthless. The average pre-deal warrant is trading at a measly $0.12 vs. ~$0.75 just a year ago. If you can snag the warrants for SPACs that will ultimately close you stand to make a nice return however, many will end up worthless.

<a href="https://www.boardroomalpha.com/author/draps/" target="_self">David Drapkin</a>

David Drapkin

Spent his formative years at Goldman Sachs and now embraces the start-up life in NYC. A long suffering Oakland (Las Vegas) Raiders fan and graduate of the Wharton School at the University of Pennsylvania. Semi-professional go-kart racer waiting for his shot.

Know Who Drives Return

Objective, data-driven assessments for every public company director and officer.

SPAC Analytics & Database

Comprehensive research and analytics on every SPAC, sponsor, and deal. Real-time alerts, yields, red flags, filings, investors, and much more. API access to institutional grade SPAC database.

Monthly SPAC Review

SPAC Market Review – July 2022

Liquidations, cancelled deals, and a dead IPO market highlight Boardroom Alpha’s July 2022 SPAC market review. Read for a full recap.

SPAC Market Review – June 2022

Boardroom Alpha’s June 2022 SPAC market review looks at the latest trends in SPACs, where the market is heading a recap of activity.

SPAC Market Review – May 2022

Inflation, rising interest rates, and reduced corporate earnings across the board have led to persistent market gyrations which prove its too early for bottom fishing. The stampede out of deSPACs now makes it ‘deal-or-die’ time for those without targets.

SPAC Research & Analysis

SPAC Daily: Tuesday 9/14

Maxpro Acquisition (JMAC) penned the lone SPAC DA of the day, plus the rest of today’s news in the market.

Know Who Drives Return Podcast

Podcast: Westrock Coffee CEO Scott Ford

Join David Drapkin as he speaks to Westrock Coffee CEO Scott Ford. Westrock Coffee is going public company via a $1.1B deal with Riverview Acquisition Corporation (RVAC).

Disclaimer

The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but Boardroom Alpha cannot guarantee its accuracy and completeness, and that of the opinions based thereon. 

This report contains opinions and is provided for informational purposes only – it does not constitute investment, legal or tax advice. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional before you make any investment.  

None of the information contained in this report constitutes, or is intended to constitute a recommendation by Boardroom Alpha of any particular security or trading strategy or a determination by BA that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.  

No representation or warranty, expressed or implied, is made on behalf of Boardroom Alpha as to the accuracy or completeness of the information contained herein. Boardroom Alpha does not accept any liability for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on all or any part of this research and any liability is expressly disclaimed.