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SPAC Talk

Bright spots amid a tepid appetite for SPAC IPOs. The SPAC IPO market in 1Q24 saw little deviation from the tepid appetite evident in the preceding three quarters. Just six issuances were made in the quarter. April thus far has not added to the total, with a pipeline of 33 live S-1 registrations indicating no major uptick in activity is in the offing. However, there are a couple of positives to report. Half of the IPOs priced last quarter succeeded in raising more than $100 million in capital, with Legato Merger Corp. III (NYSE: LEGT-UN) backed by serial SPAC sponsor Crescendo Partners, raising an upsized ~$201 million. Furthermore, among the six pricings, one SPAC has already found a merger partner. Priced in January 2024, Asia-based JVSPAC Acquisition Corp. (NASDAQ: JVSA) plans to combine with Hotel101, a short-term condominium rental platform and subsidiary of Philippines investment company DoubleDragon Corp. The IBC is expected to have an equity value of $2.3 billion, so it’s not a small deal by any means and curiously 40x the equity raised ($57.5 million) by JVSA from its IPO. More active on the deal front. IBC deal announcements have continued at a steady pace, although the 28 announcements in 1Q24 were a slight drop off from the +30 deals penned in prior quarters. April has been slower, with two deals announced in the second half of the month. While most of these deals are assessed at sub-$500 million valuations, it seems there is a greater prevalence of larger-sized deals valued north of $1 billion among them. As we approach completion of the first third of 2024, 20% (six) of all deals (30) announced YTD have been assessed with valuations of +$1 billion. This compares with 7% (11) of all deals (159) announced in 2023. One contributing factor may be a revival of the PIPE market. Big drop-off in liquidations. This year has seen sharp drop in SPAC liquidations. Fifteen SPACs have liquidated their trusts, returning $4.5 billion to public shareholders so far this year. The same period in 2023 saw 79 SPACs liquidated, returning ~$24 billion. The sharp drop in liquidations is no surprise given the shrinkage of the SPAC universe. As of writing, there are 101 SPACs searching for merger partners, about one-quarter of the number at the start of 2023. Although we will not see the number of liquidations anywhere near that of 2023 (202) and 2022 (146), we expect it will still be well above what was considered the norm prior to 2022, bearing in mind that there are more than 60 SPACs that are still searching for targets for longer than two years and another 27 SPACs that have yet to close deals more than one year after announcement. De-SPAC misery (mostly) continues. When it comes to de-SPACs, there are few bright spots to speak of. Our SPAC Talk Focus discusses further.