(Bloomberg) -- Even with markets rallying for months, the pace of traditional initial public offerings is behind what bankers expected. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon called the lack of deals “odd” before blaming costs and red tape.
With the likes of former Hollywood executive Harry Sloan, veteran dealmaker Betsy Cohen and now Oaktree Capital Management, the nearly $200 billion investment firm run by Howard Marks, getting back in the SPAC game, could the answer to Dimon’s dilemma be the humble blank-check company?
Blank-check firms are gaining steam again — much as they did at the start of the pandemic, when record low interest rates and extreme market volatility prompted the owners of companies weighing IPOs to choose mergers with already-listed special purpose acquisition companies.
Even after the US Securities and Exchange Commission tightened the rules, and many SPAC deals left investors with losses, blank check heavyweights are lining up to keep the beaten-down industry going.
Oaktree, which has completed two SPAC deals including one that took Hims & Hers Health Inc. public at a $1.6 billion valuation in 2021, filed last week for a new blank-check listing that’s looking to raise $175 million.
Raising money and hunting for targets now makes sense ahead of 2025, when some are predicting the pipeline of companies waiting to go public could really start flowing.
“It’s a quiet market now, but you want to be prepared for an opportunity,” said Brian Hirshberg, a partner at law firm Mayer Brown. “For a serial SPAC issuer it makes sense to just have one out there because if the market turns a corner then you’ll have one that’s ready to go and make a deal. You can’t wait until there’s a perfect market, you kind of already have to have it out there.”
Sloan and his SPAC partner Eli Baker filed last month to raise a $250 million blank check the same day that Cohen’s firm put together paperwork for a $200 million vehicle. They join a warming market that has seen some $5.4 billion raised by SPACs since April after US regulators tightened rules around financial projections that helped fuel the go-go days of 2020 and 2021.
Avi Katz’s GigCapital Global, Howard Lutnick and Asia casino magnate Lawrence Ho’s family office are among the sponsors to price new deals this summer, with 26 SPACs raising $4.7 billion since the start of June, SPAC Research data show. The vehicles are replenishing a pipeline of deal-needy SPACs that has tapered to about 200 from a peak of more than 600 pre-deal vehicles a few years ago.
One way for a SPAC sponsor to help backstop the deals is to use a so-called private investment in public equity. That is a commitment by a group of investors to buy shares at $10, swelling the amount beyond just what cash the SPAC itself holds, and supporting the deal and its valuation. But drawing investors to PIPEs has become tough.
“The successful SPACs from 2020 and 2021 had sizable PIPEs and I think that market is not what it was because a lot of those investors did not do well,” Hirshberg said.
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