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August 10 2020

The year 2020 is when SPAC, the obscure finance term, was added to the popular lexicon. The nickname “blank check company” has often dominated headlines. Nikola is perhaps the most prominent example of a tech company that has gone public this way.

So what exactly is SPAC and how does it work? 

Special-purpose acquisition companies, SPACs, usually go public with offerings in $10 units which consist of one common share and an out of the money warrant. The SPAC manager outlines the criteria of the business it is looking to merge with, and then start to look for such a target. Once a target is identified, the manager will ask for a shareholder vote to go ahead with the merger. The documents on the target are provided confidentially to the shareholders for the vote, and will subsequently file publicly once the merger is announced. 

If the manager fails to find a merger target within a pre-specified about of time, the SPAC is dissolved and the money raised through the public offering is returned to shareholders. 

What led to the increase in SPAC’s popularity?

There is an increased number of SPAC deals in recent years, mostly driven by two factors- the participation of household name investment banks and retail demand. 

In a traditional IPO process, the consortium of advisors would provide underwriting to the company, putting up capital upfront. In a SPAC process, the SPAC manager raises money directly from the capital market due to the light due diligence and the fact that shareholders have an opportunity to vote in the merger process. Therefore, SPAC deals are usually advised by middle-market investment banks that don’t usually get the same cache. 

In recent years, the size of the PE and PE-style deals have increased dramatically. Household investment banks have realized the opportunity and established their practices. Those bulge-bracket banks have helped to propel SPAC deals into the popular vernacular.

The demand from retail investors has also increased over the years. SPACs allow retail investors to invest in private equity-type transactions, particularly leveraged buyouts. Retail investors can have access to an experienced management team composed of three or more members with prior private equity, mergers and acquisitions, and/or operating experience, which had been out of reach previously. 

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Companies that have gone public through SPACs:

DraftKings is a daily fantasy sports contest and sports betting, provider. The company allows users to enter daily and weekly fantasy sports-related contests and win money. It is founded by Jason Robins, Paul Liberman, Matthew Kalish, and Matt Kalish in 2011.

Hyliion is an American company that specializes in Class 8 electrification. It designs and develops hybrid suspension systems and electrified powertrain solutions for Heavy Duty Class 8 trucks from commercial vehicle manufacturers. It serves the semi-trailers and trucking industries in the United States.

Topgolf is a global sports entertainment company headquartered in Dallas, Texas with locations in the United States, United Kingdom, and Australia. The company's largest investors are WestRiver Group and Callaway Golf.

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Epic Games, creator and publisher of the massively popular “Fortnite” game, announced a $1.78 billion round of funding — which the company says gives it a post-money equity valuation of $17.3 billion.
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Since last week, PrivCo has added:
1,069 Updated Companies | 87 M&A Deals172 Funding Activities

Funding & Deal Highlights:

Ginger, the leader in on-demand mental healthcare, today announced a $50 million Series D funding round led by Advance Venture Partners and Bessemer Venture Partners. Additional participants include Cigna Ventures and existing investors such as Jeff Weiner, Executive Chairman of LinkedIn, and Kaiser Permanente Ventures. This latest round of investment brings the company’s total funding to over $120 million.

Asian-Inspired Sparkling Water Brand Sanzo Raises $1.3 Million In Seed Funding To Expand Distribution.

BRIO Systems, a technology company offering a complete COVID-19 testing system for the workplace, has raised $1.9 million in seed funding to advance its platform that helps employers navigate the complexities of workplace safety and reopening amid the pandemic.

A startup called Mode Analytics, which has built a platform incorporating machine learning, business intelligence and big data analytics to help data scientists fulfill that task, is announcing $33 million in funding to continue making its platform ever more sophisticated.

StreetLight Data, Inc., a San Francisco, CA-based Big Data analytics platform for mobility, closed a Series D funding round of $15m.

Aerovate Therapeutics, Inc., has closed on $72.6 million in Series A funding to advance trials of AV-101, an inhaled, dry powder aerosol version of imatinib to treat pulmonary arterial hypertension (PAH). An oral version of imatinib showed significant efficacy in a phase 3 trial as a disease-modifying therapy for PAH, but it was poorly tolerated by PAH patients because of systemic side effects.

Verikai, a San Francisco, CA-based insurance technology company, raised $6m in Series A funding. The round was led by ManchesterStory with participation from ValueStream Ventures and Plug N Play., the frictionless platform for financial institutions to move money in real-time, has raised $5.2M in Seed funding from investors that include Homebrew, Acrew, Bain Capital Ventures, Clocktower, and Box Group. was founded by Stephany Kirkpatrick in 2019.

Procurement automation platform secured a $5 million seed round, led by Aleph, that will help the Israel-based company enter the U.S. market, according to the company.

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