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SPAC TALK

A quiet July...so far. July has been a relatively quiet month to date. Two SPAC IPOs have been priced, which is par for the course in the context of the low-single digit numbers we have been reporting the past twelve months. The exit doors also seem to be less crowded this month, with only nine SPACs scheduled for liquidations vs the average twenty per month that elected to liquidate their trust funds in the first half of the year. However, with twenty-two SPACs facing extension votes over the remainder of the month, that number could rise. It has been unusually quiet on the deal announcement front too, with only one deal announced as we hit the mid-month mark. AltC Acquisition Corp (ALCC) led by serial sponsor Michael Klein and with ChatGPT founder Sam Altman on the board, announced a pre-money $850M combination with nuclear fission technology firm Oklo on July 11. Electrifying Nikola. Last week, our main topic of discussion focused on the troubled EV SPACs, being among the worst performers in one of the worst performing investment categories – de-SPACs – over the past two years. As one of the first major EV de-SPACs, NKLA not only best epitomizes the excesses of the SPAC market, but also investor overexuberance with emerging trends such as ‘green’ mobility. Since hitting heights above $90 within a week of its de-SPACing in early June 2020, NKLA stock has been on a downward slide hitting an all-time low of $0.52 on June 6, 2023. However, since then, NKLA has been recharged, rallying more than 300% amid news of its deal with hydrogen supplier Bayotech, which has agreed to purchase up to 50 Nikola Class 8 fuel cell EVs over the next 5 years. But even after this recent rally, NKLA is only flat YTD while the Bloomberg de-SPAC index (DESPACTR) is up 27%. SPACs and the case of the disappearing projections. Fifteen months ago, the SEC unveiled its proposals targeting what it believed to be the main excesses that fueled the speculative bubble in the SPAC market in 2020/2021, notably ‘misleading’ forward projections. While these proposals have yet to be finalized, it does appear that the mere threat of tougher, more penal rules has been sufficient to induce some degree of self-regulation among SPACs. This is most clearly illustrated by the significant decrease in SPAC IBC deals utilizing forward financial projections as they are allowed to do under present rules. This is the topic of this week’ SPAC Talk Focus.