SPACs - One of Wall Street's Hottest Trends Continue to Be Viewed as Favorable Opportunities in 2022
In fact, the SPAC's only assets are typically the money raised in its own IPO.
PALM BEACH, Fla., Oct. 25, 2021 /PRNewswire/ -- FinancialNewsMedia.com News Commentary - A special purpose acquisitions company (SPAC) is essentially a shell company set up by investors with the sole purpose of raising money through an IPO to eventually acquire another company. A SPAC has no commercial operations — it makes no products and does not sell anything. In fact, the SPAC's only assets are typically the money raised in its own IPO. Usually a SPAC is created, or sponsored, by a team of institutional investors, Wall Street professionals from the world of private equity or hedge funds, while even high-profile CEOs have jumped on the trend and formed their own SPACs. That's because when a SPAC raises money, the people buying into the IPO do not know what the eventual acquisition target company will be. Institutional investors with track records of success can more easily convince people to invest in the unknown. That's also why a SPAC is also often called a "blank check company." An article in CNBC.com said that: "Once the IPO raises capital (SPAC IPOs are usually priced at $10 a share) that money goes into an interest-bearing trust account until the SPAC's founders or management team finds a private company looking to go public through an acquisition. Once an acquisition is completed (with SPAC shareholders voting to approve the deal), the SPAC's investors can either swap their shares for shares of the merged company or redeem their SPAC shares to get back their original investment, plus the interest accrued while that money was in trust. The SPAC sponsors typically get about a 20% stake in the final, merged company." Active companies in the markets this week include ShiftPixy, Inc. (NASDAQ: PIXY), Digital World Acquisition Corp. (NASDAQ: DWAC), WeWork (NYSE: WE), Opendoor Technologies Inc. (NASDAQ: OPEN), BowX Acquisition Corp. (NASDAQ: BOWX).
The article continued: "However, SPAC sponsors also have a deadline by which they have to find a suitable deal, typically within about two years of the IPO. Otherwise, the SPAC is liquidated and investors get their money back with interest. SPACs have been around for decades and often existed as last resorts for small companies that would have otherwise had trouble raising money on the open market. But they've recently become more prevalent because of the extreme market volatility caused, in part, by the global pandemic." A report from a high profile law firm in the industry (Katten.com "Despite Slowdown, SPACs Continue to Be Viewed as Favorable Investment Opportunities") said that: ""Investors expect that the conditions that have fueled SPACs' growth over the last few years will continue to exist for the foreseeable future," says Brian Hecht, a partner in Katten's New York office. "There will be some ups and downs along the way, including the relative slowdown in SPAC IPOs we're seeing now, for a variety of reasons, including some pullback from the stock market run-ups that SPACs had been experiencing, recent pronouncements from the Securities and Exchange Commission (SEC) and perhaps just a perception that it's an appropriate time for the SPAC market to catch its breath after the frenetic activity in the first quarter. But it appears, more generally, that the momentum fueling the SPAC market is sustainable."
ShiftPixy, Inc. (NASDAQ: PIXY) BREAKING NEWS: ShiftPixy Announces Launch of Groundbreaking SPAC Offering – ShiftPixy, a Florida-based national staffing enterprise which designs, manages, and sells access to a disruptive, revolutionary platform that facilitates employment in the rapidly growing Gig Economy, today announced the successful completion of the initial public offering ("IPO") of the common stock of Industrial Human Capital, Inc. ("IHC"), a Special Purpose Acquisition Companies (SPAC) sponsored by ShiftPixy through its wholly-owned subsidiary, ShiftPixy Investments, Inc. Pursuant to the IPO, IHC sold 11,500,000 units to the public at a price of $10 per unit, with each unit consisting of one share of IHC common stock and one redeemable warrant, with each whole warrant exercisable to purchase one share of IHC common stock at a price of $11.50 per share, subject to adjustment. This includes the exercise in full by the underwriters of their over-allotment option to purchase up to an additional 1,500,000 units. The units are listed on the New York Stock Exchange ("NYSE") and began trading under the ticker symbol "AXHU" on October 20, 2021.
Once the securities comprising the units begin separate trading, the common stock and the warrants are expected to be listed on the NYSE under the symbols "AXH" and "AXHW," respectively. ShiftPixy hopes to enter into client service agreements with Industrial Human Capital to supply its human capital needs, which ShiftPixy believes will lead to assembly of one of the largest ever light industrial staffing collectives in the market.
"The ShiftPixy platform was designed to rapidly scale and support high staffing industry volumes, and we see an opportunity to leverage the ShiftPixy technology platform to underpin what we anticipate will be a significant consolidation event for the industry," said ShiftPixy Co-Founder and CEO Scott Absher. "The potential impact on ShiftPixy's income, profits and asset value is extraordinary and the culmination of a great deal of innovation and years of hard work."
ShiftPixy expects that entry into client service agreements with Industrial Human Capital provide an opportunity for increased annual revenue of as much as $1 billion, and accretive pre-tax annual earnings of $50 million. Read this and more news for ShiftPixy at: https://www.financialnewsmedia.com/news-pixy/
Other recent SPAC developments in the markets include:
Trump Media & Technology Group and Digital World Acquisition Corp. (NASDAQ: DWAC) have recently entered into a definitive merger agreement, providing for a business combination that will result in Trump Media & Technology Group becoming a publicly listed company, subject to regulatory and stockholder approval. The transaction values Trump Media & Technology Group at an initial enterprise value of $875 Million, with a potential additional earnout of $825 Million in additional shares (at the valuation they are granted) for a cumulative valuation of up to $1.7 Billion depending on the performance of the stock price post-business combination. Trump Media & Technology Group's growth plans initially will be funded by DWAC's cash in trust of $293 Million (assuming no redemptions).
Trump Media & Technology Group's mission is to create a rival to the liberal media consortium and fight back against the "Big Tech" companies of Silicon Valley, which have used their unilateral power to silence opposing voices in America.
WeWork (NYSE: WE), a workspace sharing company made its long-awaited public listing on Thursday, Oct. 21, climbing 13.49% on its first day of trading to close at $11.78. Instead of going public through a traditional (IPO), the New York City-based company completed a $9 billion merger with blank check firm BowX Acquisition Corp. (BOWX), a listed special purpose acquisition company (SPAC).
PACs comprise a group of large investors that come together to help a company speed up its public listing, often at the expense of transparency for outside investors. In recent years, SPACs have increased in popularity with investors, given their structure allows profits to be generated relatively quickly. As of Oct. 22, 489 SPACs have gone public in 2021, raising more than $135 billion, up from $83 billion last year.
Opendoor Technologies Inc. (NASDAQ: OPEN) Access Technology Ventures, the venture capital and growth technology investment arm of privately held industrial group Access Industries, recently announced an additional $300 million purchase of stock of Opendoor Technologies Inc. a leading digital platform for residential real estate.
Access' additional purchase of Opendoor stock is consistent with Access' strategy to invest in and help build foundational companies that touch millions of customers across the consumer and enterprise technology ecosystems. Access has supported Opendoor since 2015 and has either led or participated in every subsequent private financing, including the company's private placement in 2020 leading up to its IPO.
BowX Acquisition Corp. (NASDAQ: BOWX), a special purpose acquisition company, and WeWork Inc., a leading global flexible space provider, recently announced the completion of their business combination. The combined company will now operate as WeWork Inc. and will begin trading on the New York Stock Exchange under the ticker symbol "WE" on October 21, 2021.
Sandeep Mathrani, CEO of WeWork, said, "Today is a testament to the determination of our company to not only transform our business, but also to adapt and deliver the options that today's workforce demands. As companies around the world reimagine their workplace, WeWork is uniquely positioned to offer the space and services that can power solutions built around flexibility. Providing employers and landlords around the world with our holistic offering of space-as-a-service, All Access and workplace management technology will enable WeWork to lead the market in mainstream adoption of flexible space."
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