2020 was the year that special purpose acquisition companies, or SPACs, glowed up. SPACs, formerly seen as a “sketchy way” for second-rate companies to come to market, captured the attention of investors and markets. 248 SPACs raised $83 billion in 2020. This year, the SPAC market is already challenging growth we saw in 2020.
This growth means billions of dollars in new investment, dozens of new SPACs and lots of possible acquisitions targets.
So, we’re breaking down the biggest SPACs to keep an eye on for the first quarter of 2021:
1. Chamath’s SPACs: $IPOD, $IPOE, $IPOF
If there’s anyone who deserves credit for starting the SPAC craze, it’s Chamath Palihapitiya — the man bringing an alphabet’s worth of SPACs to markets. Chamath brought Virgin Galactic public through his first SPAC, $IPOA. Virgin Galactic re-listed as $SPCE and went on to be one of the biggest stocks of 2020, rising 190%.
That said, it should come as no surprise that we’ve short-listed all three of Chamath’s latest SPACs:
- Social Capital Hedosophia Holdings IV ($IPOD) is currently seeking a tech acquisition target. The $IPOD team has a special team member in Nirav Tolia, the former CEO and co-founder of Nextdoor.
- Social Capital Hedosophia Holdings VI ($IPOF) is the second of the pre-deal SPACs. It raised $1 billion to seek an acquisition target in tech. They count former Twitter CEO Richard Costolo as the SPAC’s special team member.
- Social Capital Hedosophia Holdings V ($IPOE) is the only one of the three SPACs which has already struck a deal. $IPOE will reverse merge with one of the biggest student loan refinancing companies. SoFi ($SOFI) has become a monolith of the neo-banking and fintech revolution. Now, they are looking to capitalize on the double-digit growth in the lending and banking sector.
Despite all of the excitement in Chamath’s SPACs, it is worth observing that these IPOs trade at a considerable premium to their original valuations. A premium would be anything over the initial offering at the raise, which in Chamath’s case is $10 per share for most of his SPACs. Private investment in public equity (PIPE) deals are common across all of Chamath’s SPACs. This means that if a SPAC rises from its offering price, it might be overvalued. Regardless, all of the social interest in Chamath and his SPACs might make up for any real or perceived premiums. So, we recommend keeping an eye on these.
We actually interviewed the SPAC legend himself on Bullish YouTube. You can watch the full video here.
2. Forest Road Acquisition Corp: $FRX
Forest Road Acquisition Corp ($FRX) is a SPAC which came onto our radar after its raise this past November. Its power team of media insiders and celeb board members quickly attracted investor attention. The team includes former Disney execs Kevin Mayer and Tom Stagg, Shaquille O’Neal and Martin Luther King III.
$FRX raised $300 million in its IPO. It’s still pre-deal and seeking an acquisition target in media, tech and telecom.We think $FRX is a SPAC with big potential upside baked in because of its team, potential connections, and big players.
3. Churchill Capital Corp IV: $CCIV
Energy has been one of the most represented fields in the SPAC market. SPACs have acquired scores of electric vehicles (EVs), solar, lithium and car-charging companies and brought them to market. Many of these SPACs have gone onto tremendous success (which you can follow on our Rippers series on Public).
Churchill Capital Corp IV ($CCIV) is rumored to be in negotiations with EV company Lucid Motors. Lucid was on the verge of failure in 2018 when Saudi Arabia’s Sovereign Wealth Fund handed them a lifeline . This investment booned Lucid, which will launch its flagship luxury EV in Spring 2021.
$CCIV Chairman Andrew Liveris, a former executive with ties with Saudi Arabia, is believed to be the X-factor in closing the deal. In a classic case of “buy the rumor, sell the news,” thousands of investors bought $CCIV. If Liveris and his team close the deal, it might turn $CCIV into a high momentum, trending stock. It’s definitely one to watch.
4. Novus Capital I & II: $NOVS/$APPH & $NXU.U
One of the most exciting SPACs last year was Novus Capital, which acquired Lexington, Kentucky based AppHarvest. AppHarvest is an agricultural tech player on the cutting edge of sustainable indoor farming that quickly gained traction among investors. Novus Capital I ($NOVS) will begin trading as $APPH in late January and is already up 150% since it listed in June.
On the excitement and success of their first fund, Novus filed to IPO a second fund. The fund will be headed up by Novus chairmen Robert Laikin and Larry Paulson, who bring a wealth of experience in tech companies, supply chain, government and sales. $NXU.U will seek a “smart tech” player with an emphasis in environmental, social and corporate governance (ESG). With plans to raise $250 million for the second fund, Novus might be a lesser-known SPAC that pulls down real money for investors.
5. Group Nine Acquisition Corp: $GNAC
Media companies have fallen on hard times amidst the COVID-19 pandemic. This has made them ideal targets for buyouts, mergers and acquisitions, and SPAC deals. The most recent SPAC listing on our “SPACs to watch” list is operated by Group Nine Media, which owns new media companies like Thrillist, NowThis, The Dodo, and Seeker.
Group Nine Acquisition Group ($GNAC) will be run by Group Nine’s CEO Ben Lerer. They raised $200 million for the SPAC only months after layoffs at the company. It turns out that these things are related: troubling times in media are resulting in widespread consolidation of the industry, making smaller companies more powerful together.
We don’t know what Group Nine will acquire (in fairness, if we knew what companies all SPACs would end up acquiring, we’d probably be rich). However, if you have an interest in companies in the burgeoning field of digital media and publishing? $GNAC might be worth a closer look.
Don’t forget to check out our list of the top IPOs to watch in Q1 2021 as well!