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The Weekend Pitch |
July 26, 2020 
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Like our newsletter? The data comes from the PitchBook Platform — our data software for VC, PE and M&A |
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The special-purpose acquisition company, also known as the blank-check company, was for decades a confusing, little-seen entity with a reputation on Wall Street for helping foster stock market frauds in the go-go 1980s. In recent years, however, the SPAC has come into fashion, offering companies a path to going public that's faster and simpler than a traditional IPO.
This week, the SPAC spike may have reached its highest point yet. A hedge fund baron led the biggest blank-check IPO of all time. There's talk that one of Silicon Valley's most valuable companies could have its eye on a SPAC merger. And other notable investors and companies are circling deals in the suddenly red-hot space.
Welcome to The Weekend Pitch. I'm Kevin Dowd, and you can reach me at weekend@pitchbook.com. The SPAC is inescapable these days, which is one of 11 things you need to know from the past week: |
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Bill Ackman keeps it casual in the Hamptons in 2016.
(Matthew Eisman/Getty Images) |
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1. SPAC to the future
Hedge fund pro Bill Ackman has a long history of converting bold, contrarian bets into very large sums of money. Earlier this year, he reportedly turned a $27 million position into $2.6 billion by essentially betting that the coronavirus would cause steep declines in US equity and credit markets. In his latest move, Ackman raised $4 billion in an offering this week for a SPAC called Pershing Square Tontine Holdings, widely believed to be the largest SPAC IPO on record.
At this point, I'm not sure how many people need a SPAC-splainer. For those who do: SPACs are holding companies that raise money in an IPO on the promise of making a future acquisition or investment. Managers who commit capital to the IPO are betting on the ability of the executives behind the SPAC to find an attractive target at an attractive price.
So, in Pershing Square Tontine's case, the listing amounts to a $4 billion gamble on Ackman and his team. What sort of deal will the SPAC pursue? Ackman has indicated that the vehicle has $5 billion in total capital, including his fund's own money, and that he wants to make a minority investment in a highly valued growth company. If you're looking for more vibrant imagery, Ackman told Bloomberg TV this week that the SPAC is now "in a unicorn mating dance."
There are only so many growth companies out there in which a $5 billion investment might buy a minority stake. Which brings us to Airbnb.
The pandemic has caused serious strain at the vacation rental company, including a significant number of layoffs, but Airbnb has revived talks of potentially going public in 2020. This week, CEO Brian Chesky told Reuters that the company has "been approached by some people that have presented us some opportunities" regarding a merger with a SPAC. That's quite far from anything concrete, but even the prospect of a potential marriage of Ackman and Airbnb is tantalizing.
Then again, if Airbnb were to opt for a SPAC deal rather than going it alone in an IPO or a direct listing, the recent blank-check boom means the company should have multiple options.
Interest in the SPAC space was already growing before this year: Blank-check companies raised $13.6 billion across 59 offerings in 2019, compared to $1.4 billion in 10 listings back in 2013, according to the website SPAC Research. This year has already seen $19 billion raised across 50 such listings, with an average size of nearly $380 million, up 65% from last year. Virgin Galactic, DraftKings and Nikola are just some of the notable companies to recently opt for SPAC debuts.
Part of the story is quality, given the involvement of those big names. But another part is quantity.
Alec Gores and his Gores Group, a veteran of the SPAC movement, returned to the market this week with an IPO filing for their fifth blank-check company. In 2016, a Gores-backed SPAC acquired iconic snack-cake company Hostess Brands. And telecom billionaire Craig McCaw and software entrepreneur Vivek Ranadivé recently filed for SPAC offerings of their own, adding to a crowded field.
There are also plenty of potential SPAC targets on the market. Hims, a VC-backed maker of personal health and wellness products, is considering a blank-check listing that could result in a valuation of more than $1 billion, Reuters reported. Topgolf, a PE-backed proprietor of tech-powered driving ranges and gaming centers, is also said to be considering a SPAC deal, according to Bloomberg.
There are more SPACs than ever out there, and seemingly more highly valued companies than ever that are open to a deal. In the words of Ackman, let the unicorn mating dance begin.
2. Musk maneuvers
Elon Musk is many things, but boring is never one of them. This week brought reports that one of Musk's companies, SpaceX, is aiming to raise up to $1 billion in new funding at a whopping $44 billion valuation. Meanwhile, another of Musk's ventures, Tesla, reportedly filed a lawsuit against Rivian accusing its well-funded electric vehicle rival of poaching Tesla employees and encouraging the theft of trade secrets.
3. Major mergers
A winner emerged this week in eBay's auction for its classifieds business, with Norwegian classifieds conglomerate Adevinta signing a deal to acquire the unit for $9.2 billion. The oil and gas sector was also home to a high-priced takeover, with Chevron expanding its presence in the Permian Basin and elsewhere through the purchase of Noble Energy for $5 billion, or $13 billion including debt.
4. Talking TikTok
A group of investors including the likes of Sequoia, NEA and SoftBank have reportedly held talks to acquire a majority stake in TikTok from parent company ByteDance, The Information reported this week, the latest sign of TikTok's attempts to distance itself from China. In a separate move, TikTok announced the formation of a new $200 million vehicle called the TikTok Creator Fund, which will distribute money to certain creators on the app, a novel form of compensation for users driving the platform's popularity.
5. Online ingredients
Companies offering an alternative to masking up and venturing to a grocery store continue to raise some serious capital during the pandemic. MissFresh, a provider of grocery delivery services operating in China, gathered $495 million from a host of notable backers. And Misfits Market, a food delivery company competing with Imperfect Foods in the "ugly produce" category, collected $85 million, about two months after Imperfect raised $72 million. |
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| A strawberry doesn't need to look good to taste good. (MirageC/Getty Images) |
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6. Dual listings
Chinese fintech giant Ant said it has begun discussions for a dual listing later this year, with plans to begin trading shares in Hong Kong and Shanghai. In Shanghai, the Alibaba affiliate is opting to list on the STAR Market, a win for the young, tech-centric exchange that aims to be something of a Chinese equivalent of the Nasdaq. Reports also emerged that Junlebao Dairy could follow a similar dual-listing path in China, several months after Sequoia China reportedly valued the business at more than $1 billion.
7. SoftBank sales
SoftBank said earlier this year that it planned to sell off $41 billion in assets as part of a plan to buy back shares and reduce debt. The company took new steps in that direction this week, with reports surfacing that SoftBank has discussed selling its Arm semiconductor unit to fellow chip maker Nvidia and, separately, that the Japanese conglomerate has hired bankers to sell internet-of-things business Treasure Data.
8. CEO shakeup
After less than three years in the role, Glenn Youngkin announced this week that he will retire as co-CEO of The Carlyle Group at the end of the third quarter, leaving Kewsong Lee in place as sole CEO. A Bloomberg article from later in the week reported that news of Youngkin's departure follows "a long, awkward power struggle" between Lee and Youngkin after they took joint control of the firm's reins in 2018.
9. Blackstone's bounce
Blackstone reported its second-quarter earnings this week, the first of the four major publicly traded private equity firms to do so. Pros: Blackstone's PE portfolio appreciated by 12.8% in the quarter after a 22% depreciation in Q1, and the firm flipped from a $2.6 billion net loss to nearly $1.4 billion in net income. Cons: Distributable earnings declined compared to Q1, and the firm's stock ended the week down about 4% from its Wednesday close.
10. Jamf's jump
At first, Jamf thought it could sell shares in its IPO for $17 to $19. Then, the Vista Equity Partners portfolio company upped its range to $21 to $23. But demand continued to build for the business, which companies use to manage Apple devices. It ultimately priced the shares at $26 and closed its first day of trading at $39.20, becoming the latest privately backed company to see its stock soar after an IPO.
11. Fowl play
It was a big week for the confluence of venture capital and pasture-raised chickens. Vital Farms, a VC-backed purveyor of ethically produced eggs and butter, set initial terms for a looming IPO, one that could raise more than $130 million and result in a market cap of more than $660 million. And Cooks Venture, which sells a proprietary breed of pasture-raised chickens for meat consumption, raised $10 million in a new Series A deal.
View the full list online |
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A message from Ursus Technology
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How to find and nurture cloud talent in the COVID-19 era
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Every business is in the cloud business. If you want to scale successfully, the ability to source, screen, hire, train, and develop cloud computing talent is mission critical. Due to the COVID-19 pandemic, the shift to remote, and continuing expansion of online business models, the demand for talent is at an all-time high. 90% of organizations surveyed by Forrester indicated that the cloud skills gap has doubled since 2017.
Fruitlessly searching for the right talent in a shrinking candidate pool loses time and money. However, there may be undeveloped cloud talent on your existing teams!
Learn how to leverage existing talent amid other best practices here. |
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| Tying together the threads of a merger grew more difficult in Q2. (jayk7/Getty Images) |
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Tech and healthcare companies made deals to capitalize on new opportunities. Oil and gas companies made deals to stay afloat. But by and large, the North American mergers and acquisitions market stayed quiet in the second quarter of the year, with deal value declining by more than 41% from Q1.
Hot off the virtual presses this week, our Q2 2020 North American M&A Report puts that dealmaking lull into context, with data dating back to the global financial crisis. The report also examines other key forces shaping the M&A market, from the continued effect of the coronavirus to the prospect of new regulations. |
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Francois Moubandje of Toulouse FC keeps his eye on the ball.
(Marc Atkins/Getty Images) |
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This week, US private equity firm RedBird Capital Partners agreed to acquire a majority stake in Toulouse FC, a men's soccer team currently in France's second division. The deal came shortly after reports emerged indicating Bridgepoint, a British buyout shop, had expressed interest in taking a stake in the Women's Super League, the top flight of women's soccer in the UK.
Both pieces of news are part of a growing trend that PitchBook's Andrew Woodman highlighted this week: Lately, private equity firms can't get enough of pro sports. |
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| A trio of hippos, presumably on their way to offer an insurance quote. (Brent Stirton/Getty Images) |
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Home insurance startup Lemonade has been one of the biggest IPO stars of July, pricing its offering earlier in the month above its expected range and seeing its stock price nearly triple in the ensuing three-plus weeks. A rival with a similarly noun-based but ultimately nonsensical name had a big week of its own: Hippo, a Bay Area insurance startup that banked $150 million in Series E funding at a $1.5 billion valuation.
When I think of the humble hippopotamus, home insurance is not exactly the first thing that comes to mind. (What is the first thing that comes to mind? "Hungry Hungry Hippos," of course.) But Hippo, just like Lemonade, is a happy name, one that probably has pleasing connotations to most people. And when it comes to insurance, a notoriously un-fun industry, perhaps trying to put a smile on a customer's face is the best bet. |
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Recommended reads
Imitation may be the best form of flattery. But investors and founders say that Amazon and its Alexa Fund sometimes push the boundaries of inspiration. [The Wall Street Journal]
Boats full of dead squid fishermen keep washing ashore in Japan. Experts believe a Chinese armada illegally trawling the waters off North Korea may be in part to blame. [NBC News]
In a recent paper, University of Oxford professor Ludovic Phalippou made the case that PE returns are not what they claim to be. Consider it his final warning. [Bloomberg]
The pandemic is turning 2020 into a lost year. For those with young kids who just want it all to end, it's also turning parents into liars. [Esquire]
As China's Great Firewall has long demonstrated, there isn't just one internet. That idea may be key to understanding why investors are eagerly pouring billions of dollars into India's Jio Platforms. [Stratechery]
For better or worse, the pandemic is creating new opportunities for the ever-popular pastime of getting distracted at work. [Vox]
Europe's venture capital scene has in some ways been surprisingly resilient amid the pandemic. One entrepreneur says investors and founders shouldn't get used to it. [Sifted]
Earlier this year, Tim Bray became Amazon's highest-profile defector. Now, he's become one of the loudest voices amid calls to break up his former employer. [The New York Times] |
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Quote of the week
"It felt before the resurgence of the pandemic that deal activity was really going to pick up. Right now, it feels like it might take a little more time because there's a lot of uncertainty out there."
—Blackstone president Jonathan Gray, speaking to The Wall Street Journal after his firm's latest earnings report |
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The Weekend Pitch is produced by editor Kevin Dowd.
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