,Most valuable: A man stands near a giant sign of ByteDance's app TikTok in Beijing. ByteDance is said to be worth US$250bil, based on recent private transactions in the secondary market. — Reuters
WITH so much liquidity being created and along with it an unprecedented rally in asset prices, the special-purpose acquisition companies (SPACs) space has been one large beneficiary of these flow of monies, as some US$97.3bil (RM402.68bil) have been raised in the US alone for the first quarter of the year, beating last year’s total fund raise of US$83.4bil.
According to SPAC Research, funds raised this year via SPAC were from 298 companies, which is already more than 20% the whole of last year’s total of 248 companies.
With so much money in these blank cheque initial public offering (IPO) companies, it is natural that these companies themselves are scrambling to get assets injected into their listing entity as time is not on their side either. Most SPACs exist for fixed timeframe, usually between two or three years, and if they fail to get a qualifying asset to be injected, also known as backdoor listing via a merger, the SPAC would have no choice but to be liquidated and monies returned to shareholders.
SPAC Research data shows that presently, there are some 553 active SPACs in the US with some US$178.3bil held in trust. Out of this, 120 of them have announced business combinations valued at some US$38.2bil, and hence leaving 433 SPACs with US$140.1bil held in trust fund seeking targets. In addition, there is another huge pipeline SPACs in the form of pre-IPO with some 253 SPACs seeking a listing, which will raise another US$63.9bil.
While SPACs have all the money in the world waiting for an asset to be injected, there is another spectrum of the assets that are now being targeted, especially in the startup space. In the past few weeks, we have seen some spectacular names achieving their illusive objective of becoming a public company but via a backdoor listing rather than a fresh IPO.
This include WeWork, which is now valued at meagre US$9bil, including debt, into BowX Acquisition Corp. As part of the deal, WeWork will also raise another US$1.3bil in what is referred to as private investment in public equity (PIPE), a sort of private placement to selected investors.
Latest this week was British used-car platform, Cazoo, which agreed to sell itself to Ajax I for US$7bil. This is almost 3 times its last round of funding in October when it was valued at US$2.5bil. In that round, Cazoo raised US$311mil from private investors. According to an article in Bloomberg, the SPAC deal will raise about US$1.6bil in proceeds, including US$805mil in a cash trust from the SPAC and another US$800mil from Ajax I’s sponsors.
Another name too familiar with us, Grab, is also planning a backdoor listing by merging with a SPAC in a deal said to be worth a mouth-watering US$40bil, almost three times its last known valuation of US$14bil.