Billionaires Withdraw SPAC IPOs As Active Sports Firms Face Expiry Hour – Sportico.com

Two years ago, DraftKings went public through a special purpose buyout company, and it appears to have single-handedly ignited a frenzy of sports-related Spax. After shares of DraftKings in SPAC surged more than 600% from announcing the deal, 162 sports-related SPACs were formed, according to Athlete data. These days, however, the unbridled enthusiasm of earlier times has given way to uncertainty, as dozens of SPACs have canceled plans to go public and hundreds more have found greater obstacles to deals.

said John C. Mahon is a partner who specializes in SPACs and IPOs for the law firm Schulte, Roth & Zabel. “SPACs have been around forever, they’ve gone back to the lull periodically, and I think everyone expected them to do that.”

So far in 2022, 54 SPAC companies have withdrawn plans to hold IPOs, according to SEC filings. Among them are 11 sports-related SPAC companies, including a proposed $2 billion initial public offering (IPO) to acquire Spinning Eagle from Jeff Sagansky and Harry Sloan, the same duo that publicly floated DraftKings. Other previously successful SPAC sponsors, such as Los Angeles Dodgers co-owner Todd Boyle, Seattle Kraken billionaire owner David Bonderman and billionaire banker Ken Mullis, have also pulled proposed IPOs this year.

However, the market only seems calm compared to last year. At this point in 2021, 306 SPAC companies have held their IPOs, compared to 57 SPAC IPOs this year. But the volume for 2022 to date roughly equals all blank check IPOs of 2019, according to data compiled by SPAC Alpha.

Sports-focused SPACs continue to reach the market: football and baseball managers including Paul Conway and Randy Frankel raised $75 million in February to pursue a European soccer team. Mario and Michael Andretti had an initial public offering of $200 million in the SPAC that bears their name; Veteran Bob Prather closed a $175 million IPO to search for a sports or media entity. “SPAC’s initial public offering today reflects a natural tempo of deals,” Lee Stetner, co-head of capital markets at ICR Capital, said in a SPAC study released by the company yesterday.

There are still 30 sports-related SPAC companies trying to hold initial public offerings, including one led by Tiger Woods, as well as dozens more that have registered SPAC names with the Securities and Exchange Commission and may never file for an IPO, including A-Rod The second SPAC and Clutch was planned by SPAC’s serial sponsor and Golden State Warriors part-owner Chamath Palihapitiya.

It might be the toughest market ever for active SPACs looking for targets right now. There are 609 active SPAC companies looking for merger partners, 68 of whom are sports related. Stock prices fell across the board as investor enthusiasm waned. It is now customary to trade SPAC shares at a discount to the trust value – the amount of money shareholders can choose to raise prior to a merger. A year ago, SPAC warrants — future stock purchase rights — were deemed to have a fair value of $1, all else being equal. Today, the average buy order is trading at 47 cents. Executives at some active SPAC companies, speaking in the background, reported that potential merger partners continue to demand peak valuations for public advertising, despite the weak market.

SPAC companies that can find deals have trouble closing them, because investors choose to redeem their shares for trust money rather than transfer their equity to the combined business. There are 117 SPAC companies that have signed merger agreements but have not yet closed deals. Among them, RedBall, which struck a deal with SeatGeek in October, and B. Riley Principal 150, which expected to end its merger agreement in November with esports group Faze Clan weeks earlier.

“The average SPAC close of a deal in the first quarter of 2022 has 85%+ callbacks,” said a hedge fund manager specializing in SPAC deals. Athlete By email. The CEO requested anonymity because the company is a significant shareholder in several active SPACs. “The redemptions are very high because SPAC investors have to recycle their capital because their portfolios are already tight from all of the SPAC IPOs last year. There is not enough underlying buying interest to offset these redemptions. I don’t see that changing in the 12 months coming.”

The extended market means that early SPACs after DraftKings are likely to reach the end of the time period to find an initial business pool.

The first is sports-focused Bull Horn Holdings, in which Baron Davis is involved, which sees its deal window close on May 3. The company set a shareholder vote in late April to extend the window by six months, through November. In such a vote, the shareholders can elect to redeem their shares for fiduciary capital potentially leading to the liquidation of SPAC. That’s not a given, because Bull Horn shares were trading at $10.10 yesterday, equal to the trust amount. The company did not respond to a request for comment.

Eight SPAC centers have been liquidated over the past three years, and if Bull Horn closes, it will be the first sports SPAC to be dissolved since the first sports SPAC – Sports Properties Acquisition Co. , a 2007 effort by Hank Aaron, Jack Kemp, and Mario Cuomo to buy a hockey or baseball franchise.

On top of all the market problems, SPACs also face proposed tougher regulations from the Securities and Exchange Commission, including greater responsibility for sponsors and implied by over-optimistic trading expectations. Such rules may lead to another lull in the market as participants discover what they can and cannot do. Any new rules will likely apply to already active SPACs.

However, the demand for SPAC stopped in 2007 and 2008, and the market eventually returned.

“At the end of the day there will always be a way for SPACs,” Mahon said. “I think some of the excitement around the structure might be a little subdued. I would say there are 20 plumbers out there who will be doing deals in the sport, but unfortunately they may have to wait.”

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