Institutional Recognition and Beyond: IPO Edge Presents 2nd SPAC Roundtable – IPO Edge
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Institutional Recognition and Beyond: IPO Edge Presents 2nd SPAC Roundtable
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Institutional Recognition and Beyond: IPO Edge Presents 2nd SPAC Roundtable

Chris Weekes, Tim Manning, and Zach Fisher of Cowen Inc.

By John Jannarone

Not long ago, the special-purpose acquisition company, or SPAC, was a fledgling vehicle considered a second-rate path to the public markets. But in the last several years, issuance of SPAC IPOs has exploded, rivaling major asset classes and accounting for a quarter of U.S. IPO volume. SPACs, also known as “blank check” companies because they raise cash to find targets, have also completed deals with dozens of large, high-quality companies and traded very well upon listing.

For many private-equity firms in particular, a SPAC transaction is frequently more appealing than a regular-way IPO or a private sale. SPACs have become part of the conversation among bankers with clients who want to sell or go public.

In short, SPACs have become a recognized institutional product.

What makes a good SPAC sponsor? What does an investment bank need to do to ensure success? And what are the limitations on SPACs in terms of size and target companies?

IPO Edge addressed these questions at its second SPAC Roundtable, Institutional Recognition and Beyond, featuring three senior professionals from Cowen Inc., all of whom specialize in SPACs. They include Tim Manning, Managing Director, Special Situations; Christopher Weekes, Managing Director, Capital Markets; and Zach Fisher, Managing Director, Investment Banking.

Cowen has worked on SPAC transactions including the following recent deals:

Monocle Acquisition Corp. (tickers: MNCL, MNCLU, MNCLW)

Cowen Lead Bookrunner on $175 million IPO in February 2019.  Announced business combination with AerSale Corp, a leading integrated, global provider of aviation aftermarket products and services, on December 9, 2019, with an enterprise value of $430 million. The transaction is expected to close in Q1 2020. 

VectoIQ Acquisition Corp. (tickers: VTIQ, VTIQU, VTIQW) 

Cowen Lead Bookrunner on $230 million IPO in May 2018.  VectoIQ is focused on automotive mobility and technology. VectoIQ is currently seeking a business combination target.

Constellation Alpha Capital Corp. (tickers: CNAC, CNACU, CNACW, CNACR)

Cowen Lead Bookrunner for $145 million IPO in 2017.  Constellation closed its business combination with DermTech, Inc. (DMTK), a molecular genomics company with a focus on non-invasive diagnostic tests for skin disease, in August 2019 and concurrently raised a $25 million PIPE with high-quality healthcare investors. The stock is currently trading at ~$14.00.

ConvergeOne (tickers: CVON, CVONU, CVONW) 

Cowen served as financial advisor to Forum Merger Corporation, as placement agent on a $144 million PIPE and as dealer manager to ConvergeOne on a post-close warrant tender offer.  ConvergeOne is a leading global IT services provider of collaboration and technology solutions who completed a merger with Forum Merger Corporation (Nasdaq: FMCI) on February 20, 2018, at an enterprise value of $1.2 billion, resulting in Nasdaq-listed public company ConvergeOne.

The complete interviews with each of the roundtable participants can be found below.

Chris Weekes, Managing Director, Capital Markets

Much of the success of SPAC transactions is due to a watershed structural change: the separation of the vote and the ability to redeem shares for cash, which allows virtually all deals to be approved. However, it remains critical to raise enough capital for a business to achieve a significant free float, be attractive to investors and meet various exchange requirements. Often times, that requires sponsors and their advisors to succeed in retaining or replacing certain investors with other longer-term holders who want to own the target company. That undertaking, known as the de-SPAC process, is the most critical part of a SPAC’s lifecycle, according to Chris Weekes, a Managing Director in Cowen’s Capital Markets Group. Mr. Weekes added that as SPACs continue to evolve, they have become part of the conversation with most investment bankers with clients who want to sell or go public. He also said that sponsors should look for investment banks, like Cowen, that offer value throughout the process, from the IPO to the search for a target to post-deal support with knowledgeable research analysts. The full interview is below:

IPO Edge: SPACs have come a long way, especially in the last couple of years. What has led to the recent success?

Mr. Weekes: A few things in my opinion: The quality of the sponsors has improved, the average enterprise value of SPAC mergers has increased, recent strong stock performance and some other structural elements that have changed.

The most notable structural change has been the bifurcation of the vote and the redemption right. In the earlier SPACs, the vote and the redemption right were tied to each other so many deals struggled to receive approval. Before they were separated, investors could amass large positions and impact the outcome of a potential merger. This doesn’t exist anymore.

Now, you can vote “yes” to approve a deal even if you want to redeem your shares for cash. You can also hold onto your warrant, which will only have value if a deal closes. As a result, the vote has become perfunctory. Virtually everyone votes “yes.” Most mergers go forward.

IPO Edge: Is the bifurcated structure healthy for the market?

Mr. Weekes: Yes, but it doesn’t solve everything. While deals almost always get approved, there is still the need to retain, replace or raise additional capital for the business – this is called the de-SPAC process. The investors in the SPAC IPO don’t always end up being natural holders of the equity in the pro-forma business. It all depends on what the SPAC ends up acquiring and if that company fits the investment thesis of the SPAC investor. If there isn’t alignment, the SPAC and the target will need to market the transaction similarly to a regular way IPO. In order to raise equity capital and to solve for appropriate free float and other exchange-related requirements, the company will market the transaction to equity investors. They will go on a roadshow, market the story and sell stock.

IPO Edge: Are higher-quality participants part of the story?

Mr. Weekes: The entire ecosystem has matured. On the sell-side, there are more underwriters and more advisors resulting in more developed sell-side support. SPAC mergers have become a regular part of the discussion for most investment bankers looking to advise clients on selling or going public. SPACs seem to have become part of the fabric of many institutions.

On the sponsor side, the quality has improved for a number of reasons. One, the amount of assets held in private equity today has exploded beyond what we’ve ever seen. They need multiple exit or liquidity vehicles. A sale to a strategic buyer is one. A traditional IPO is another. A private equity trade or recap is a third. But the private equity market has a finite life for each portfolio company they own. SPACs have become the fourth normal course opportunity for an exit or alternative path to future liquidity.

If you peel back the onion on the regular-way IPO market, there are really only two sectors that have consistently had access to the public markets: TMT, specifically software, and healthcare, specifically life-sciences. In 2019, there were 70 healthcare IPOs, 42 TMT IPOs and 59 SPAC IPOs. That is really incredible when you think about it.

IPO Edge: Should we look at success on the front and back end as connected or separate processes?

Mr. Weekes: The front end has become somewhat commoditized. After all, the SPAC unit is just a bond-like security with a low-risk return over a certain period. When considering sponsoring a SPAC though, sponsors should be critiquing the capabilities of their underwriter. Hiring an underwriter that has capabilities that apply to all stages in the life of the SPAC from formation to post-close public company is important with regard to maximizing return on gross-spread dollars. There can be a disservice to issuers when the underwriter isn’t aligned with all facets of the organization from investment banking, capital markets, research, sales and trading. Candidly, there are too many underwriters today that raise the IPO money and simply walk away because they have a contract and no ability to continue to support the sponsor.

IPO Edge: What’s the right amount of cash to raise in a SPAC IPO?

Mr. Weekes: When sponsors look to determine what size SPAC they want to issue, we advise to reverse into what we think the size of the target universe is. These days, the average enterprise value to SPAC IPO proceeds is about 3.5 times. It’s simply an exercise in determining the dilutive impact of the sponsor shares to the merger. If you have a $200 million SPAC and you find a business to buy that is $200 million of enterprise value, your $50 million of sponsor shares will be quite dilutive. Of course, there are ways in which SPAC sponsor can mitigate this issue.

On size, one of the challenges with the very large SPAC IPOs is that the universe of targets shrinks as you get larger.  That said, we have witnessed an increase in the size of the mergers in recent deals.

The average SPAC size is approximately $225 million. A $200 million SPAC can merge with a $750 million company with ease, but it can also merge with a $2 billion company because you can always flex up with more capital through a PIPE (private investment in public equity), as we’ve seen many times in recent deals.

IPO Edge: What’s the major risk to the SPAC market remaining robust?

Mr. Weekes: The biggest risk to the SPAC issuance market is the market itself – as in the stock market. We’ve had consistent gains for the last 10 years in a very low interest-rate environment.

Where SPACs play a really important role is between two goal posts of private-market multiples and public-market multiples. Take the defense sector for example: Private multiples have been trading in the high single-digits while the public-market multiples are closer to 12x to 13x range.  The opportunity is somewhere in the middle. You offer a higher multiple than a private trade but a discount to the public market, so it looks like an IPO priced to trade higher.

To the extent that there’s a contraction in that arbitrage, it could impact SPACs negatively.

IPO Edge: What kind of SPACs have performed best? Is there any common denominator?

Mr. Weekes: Size matters. Many small or microcap companies, both via SPAC merger and regular-way IPO, have struggled in the aftermarket. They’re not indexed, there’s little research, and minimal float.

The ability to properly capitalize companies so they can come out of the gate on the right footing is incredibly important.

At Cowen, we focus intensely on optimizing the de-SPAC process. We help our clients market the story to investors, we deploy the relevant industry bankers, capital markets personnel and salesforce early in the process to help clients both institutional and corporate form a view. Research analysts conduct independent due diligence and are available for investor education. This advice is critical in the de-SPAC process.

IPO Edge: Is there a limit on how big a SPAC IPO can get?

Mr. Weekes:  There’s likely a limit to the size of the SPAC itself because the dilution from the founder shares is based on the size of the SPAC IPO.

Let’s assume a $1 billion enterprise value for the target. A $200 million SPAC with 20{efe5d79870c08482e17ab0c97855f89429dac5f22c46026d3ca83573faec2208} founder shares results in $50 million of equity to the sponsor. If you did the same deal with a $400 million SPAC, the dilution would be ~$100 million.

It’s a balance between capital and associated dilution. There is absolutely a place in the world for SPACs of either size, largely driven by the relative size of the target company.

If you’re a $400 million IPO or greater, you’re either a proven team that’s done it before or you are affiliated with a large asset manager who is part of your sponsor group.  Those $400+ million SPACs are likely targeting a $2+ billion deal. There are simply fewer companies in the world with that size.

IPO Edge: What are some of the hang-ups that caused problems for SPAC deals?

Mr. Weekes: Size, sector, comps etc. all impact the success of a deal. For example, if you don’t have a clear comparable in the public market, investors might have a tough time analyzing the company. If you fall in between sectors, it can take more time explaining the story to the market. The performance of the comps and of the company itself during the de-SPAC process is critical too. Just like a regular-way IPO, if your closest comparable stock price declines 25{efe5d79870c08482e17ab0c97855f89429dac5f22c46026d3ca83573faec2208} that doesn’t help. If the company you’re merging with comes up short on projections that’s not good.

IPO Edge: What role does sell-side research play and how does Cowen look at it?

Mr. Weekes: Most banks have pulled away from stock picking and a thoughtful approach to research and it’s become commoditized. This is not new – small cap stocks haven’t garnered the right attention in the market dating back to earlier in the decade with Sarbanes Oxley, Dodd Frank and other market structure changes (e.g. decimalization). Despite some limitations, we can have research analysts in conversations with our sponsors. At Cowen, research analysts conduct independent due diligence early in the process. We use capital markets people, bankers and research analysts to help analyze and shape a company’s story to apply to the public markets. The analysts still can’t go on the road, but they are available to educate investors.

Cowen has been investing significantly in our research platform while many banks have been pulling back. We have more than 50 senior publishing analysts covering more than 900 stocks.

IPO Edge: Does research become a big selling point when you talk to IPO sponsors about becoming their advisors? What else is important?

Mr. Weekes: Our clients that look across the Cowen platform can readily see where the value is. Is there value in having an institutionally relevant analyst? Is there value in trading very large secondary-market trading volume? Of course. We have built our SPAC business with the client in mind. We have a partnership model where we take a holistic approach to everything we do and that must include alignment in the industry and the people.

As a SPAC underwriter and advisor, we’re not a high-volume shop because we’ve elected not to be a high-volume shop. If you come to us and you’re looking for targets that are outside of the industries where we focus, we may not be your best partner.

We think about the sector of the target universe. Then we think about whether that universe is ripe with opportunity. And we also want to make sure a client is the right sponsor – a sponsor who has the ability to source deals, has deep networks, and experience either in a C-suite or as an asset manager with plenty of exposure to transactions. We also want to partner with good people. Our view is that we will be partners for the long-term and we want to enjoy the relationship. That is a key part of our sustainability.

IPO Edge: Are there any specific advantages to a SPAC versus a regular-way IPO you’d highlight?

Mr. Weekes:  One is disclosure. A SPAC transaction allows for forward-looking projections to be publicly disclosed by the target. This is a differentiator since traditional IPOs typically rely on LTM (last twelve months trailing) and analyst estimates. It’s not always easy to factor in future performance in regular-way IPOs

If a company is acquisitive, the forward-looking projections give you the chance to include the pro forma numbers in the forecasts.

Additionally, SPACs have offered the ability for sellers to take more secondary capital off the table.

Another unique feature of a SPAC transaction is that valuation is fixed. The SPAC is not terribly sensitive to what the valuation is as long as it clears the public market. Ultimately, the seller (the target) and the buyer (the SPAC) are both looking for the highest valuation possible. You have to sell as much stock as you can to the market and ultimately, it’s the market that will determine what the right valuation is.

IPO Edge: How do SPAC IPOs fit into the broader IPO market?

Mr. Weekes: SPACs now represent a large percentage of the overall IPO market.  More than 20{efe5d79870c08482e17ab0c97855f89429dac5f22c46026d3ca83573faec2208} in the last three years running. It’s staggering.  At the same time, we have seen a significant increase in the number and the size of SPAC mergers so the whole market has really evolved.

Mr. Weekes is a Managing Director in the Capital Markets Group, based in New York. He has over 18 years of experience in investment banking, primarily in equity capital markets. Mr. Weekes focuses on capital solutions for public and private companies and has worked on a broad range of private and public equity and equity-linked transactions including IPOs, follow-ons, private placements and convertibles. He also manages relationships with a wide group of equity and equity-linked investors globally. Mr. Weekes is also Co-Head of Cowen’s Specialty Purpose Acquisition (“SPAC”) business. In this capacity, he focuses on underwriting SPAC IPOs as well as advising SPAC sponsors and target companies on merging with a SPAC.

Mr. Weekes joined Cowen in 2013 as part of the acquisition of Dahlman Rose & Company. Prior to Dahlman Rose, he was a Managing Director in the Equites Group at Madison Williams & Co., a boutique investment bank. Before joining Madison Williams, Mr. Weekes worked in the US Equities Group for CIBC World Markets which was acquired by Oppenheimer in 2007. Contact:

Tim Manning, Managing Director, Special Situations

Cowen is far and away the leader in secondary-market trading of SPAC shares, giving it a unique window into the so-called de-SPAC process. That is a critical advantage to both investors and sponsors alike. That’s according to Tim Manning, Managing Director in the Special Situations Group at Cowen. He also explained that SPAC IPOs have become highly popular among fixed-income and risk-arbitrage investors, especially as more banks offer leverage to investors buying SPACs. He ultimately sees SPACs continuing to thrive as more fundamental investors take interest in the product – not only as sellers of companies but as investors in various stages of the SPAC process. The full interview is below:

IPO Edge: We’ve generally seen companies that are profitable go public with a SPAC. Can a growth company that’s loss-making use a SPAC?

Mr. Manning: Absolutely. With an IPO you can’t use forward projections. With a SPAC, you can because it’s a merger. The use of forward projections helps tell a trickier story, so it can help. You can’t publish 2023 forecasts with an IPO. In fact, there are instances of companies that won’t be profitable for a couple of years and have gone the SPAC route.  Virgin Galactic Holdings, Inc. is a good example. That’s a story based on 2023 forecasts that has traded very well in the public markets.

It can also allow you to take a more highly-levered company public than you could with an IPO.

IPO Edge: Who are the natural buyers of SPAC IPOs?

Mr. Manning: The amount of capital that’s chasing yield above risk-free treasuries is enormous. A lot of investors look at SPACs as a cash-management tool to find yield on a risk-free basis.

Since SPACs hold cash in a trust and investors always have the option to redeem, you’re introducing a risk-free rate of return. That brings in a lot of credit and risk-arbitrage investors, who make up the lion’s share of the front end (the SPAC IPO itself). The back end, the de-SPAC component I mentioned earlier, becomes the most critical part of the process.  Additionally, more traditional equity investors have started to invest in SPACs based on a few reasons: (a) it’s a cash management tool and (b) there is a pre-existing relationship with the sponsor team, or they like to optionality to see a deal earlier than they might otherwise.

IPO Edge: What kind of role does Cowen play in the market for SPACs after they begin trading?

Mr. Manning: Cowen is a very large part of the secondary market in SPACs.  Our team has averaged more than 30{efe5d79870c08482e17ab0c97855f89429dac5f22c46026d3ca83573faec2208} market share in secondary-market trading for a long time.

IPO Edge: What has prompted such an interest in SPAC trading?

Mr. Manning: We’ve been in a low interest-rate environment for a long time, fueling a demand for yield.  SPACs are a yield-oriented product that includes equity upside that can be levered. As this space has gotten bigger – 4 years ago there was $5+ billion outstanding in SPACs, now we’re north of $20 billion – funds can put real money to work.

Something very appealing about SPACs is the ability to be paid to own an equity option via the warrant when you buy units at a discount to NAV. You get equity upside and a risk-free return.

It’s the only market like that.  With a convertible bond or an option you pay a premium.

IPO Edge: What are the advantages of a SPAC vs. a regular-way IPO?

Mr. Manning: As an asset owner, you can take more money off the table in a SPAC merger. We’ve seen examples where a company looked at a regular-way IPO and they could only take $50 million off the table but with a SPAC they could take $200 million off the table and return that to their LPs.

There’s also more pricing certainty. If you know you may have to raise money in a PIPE, you can have that priced before announcing publicly. With an IPO, the price can change dramatically in the last few days.

Another advantage is speed to market. From the time a company talks to a SPAC, a deal can be done in as little as three or four months. It’s six to eight months for regular-way IPOs.

IPO Edge: What’s driving the expansion of the SPAC market and how big can it get?

Mr. Manning: It remains to be seen how big SPACs can get, but there are plenty of investors looking for low risk/high return ideas. Plenty of private equity or family-owned companies would prefer a faster way to come public, more price certainty, and the ability to take more cash off the table upfront.  Especially for any company with a story that needs to be told, SPACs are the ideal option. We’re also seeing more and more top-tier sponsors entering the space so I think we will see significant growth in SPACs in the coming years.

We’ve seen private equity-type firms come in on the investor side, not just selling companies to SPACs. More blue-chip investors have come into provide cash through PIPEs.

If you go back 10 years ago, the long-only investor base did not buy SPACs until after the deal closed. That has now changed, where they will come in and buy in the secondary or structure PIPEs. We’ve seen large family offices enter the space as well.

IPO Edge: Are institutional investors able to buy SPACs with leverage to amplify returns?

Mr. Manning: Yes. At this point the European banks are the largest providers of margin on SPACs, but we’re starting to see the U.S. banks getting involved and I expect that trend to continue as they realize the safety in lending on this product. Cowen also provides a swap product to provide leverage to institutional investors.

IPO Edge: What do investors like most about SPAC IPOs?

Mr. Manning:  In the current bull market, 90{efe5d79870c08482e17ab0c97855f89429dac5f22c46026d3ca83573faec2208}+ of SPACs are completing acquisitions.  When you include the warrant coverage, it’s not uncommon to have deals that trade up 15-20{efe5d79870c08482e17ab0c97855f89429dac5f22c46026d3ca83573faec2208}+. Through SPAC IPOs, investors can achieve equity like upside with T-bill like risk to the downside.

Mr. Manning joined Cowen in 2016, serving as a Managing Director, helping spearhead Cowen’s best-in-class Special Situations business as well as working as a liaison to ECM/Banking on the SPAC product. Mr. Manning spent over 14 years at CRT Capital Group LLC, helping to build their Special Situation and Reorg Equity business. Mr. Manning served in various senior roles at CRT, most recently as Managing Director and Head of Equity Sales-Trading for the NYC region.   Mr. Manning holds a Bachelor of Business Administration in Finance from Western Connecticut State University. Contact:


Zach Fisher, Managing Director, TMT Investment Banking

SPACs now account for approximately one fourth of the entire U.S. IPO market, a result of higher-quality participants, from investment banks to private-equity firms, giving the product validation. A growing percentage of these SPACs have affiliation with an alternative asset manager. Zach Fisher, a Managing Director in the TMT Investment Banking Group at Cowen explained why that may be. Mr. Fisher also pointed out that SPACs allow owners of the selling company to take a significant amount of cash off the table, which can have appeal in a decade-old bull market. The full interview is below:

IPO Edge: What makes a good target?

Mr. Fisher: Being public company-ready, having audited financials, being of the appropriate size, having a clear comp set, having a good management team, and a clear use of proceeds.

IPO Edge: What’s driving the success of SPACs?

Mr. Fisher: First, high-quality targets are going public through SPAC mergers. In addition, you’ve had an increase in the quality and quantity of all other market participants: investment banks, SPAC sponsors, PE sellers and fundamental equity institutions who invest in the pro forma public companies.

More private company owners have become comfortable with a SPAC merger as a way to access public markets. If your company is in an industry where public valuation multiples are attractive relative to other alternatives, then SPACs can be a very attractive way to access those multiples.

IPO Edge: What should a SPAC sponsor look for in an investment bank?

Mr. Fisher: We put ourselves in a SPAC sponsor’s shoes and attempt to assess the total return provided to the sponsor throughout the life of the SPAC for the gross spread dollars. Although the term of the SPAC is limited, a SPAC goes through many different phases from IPO to the closing of a business combination … and beyond. At Cowen, we try to take a holistic approach to the value we provide to our sponsor partners throughout the life of the SPAC.

Following the IPO, the sole mission of the SPAC sponsor is to source the best merger target possible. At Cowen, we have over 200 investment bankers across five industry verticals: healthcare, technology, consumer, industrial, and energy. In addition, we have a meaningful private equity and family office coverage practice. We deploy all of our bankers – and the entire firm really – to help source that target.

Additionally, we deploy our capital markets team to evaluate the public market viability of a target. Research analysts conduct independent due diligence on target companies. Our equity research team, now over 50 publishing analysts covering over 900 public companies, can also help educate from fundamental investors during the de-SPAC roadshow process.

As a leading IPO bookrunner, generating new fundamental equity demand from new investors where we have longstanding relationships is something we do as part of our everyday business. We apply the same playbook and commitment from capital markets, sales distribution and research to our SPAC merger engagements.

Post-close, we can continue to support the company in the public markets via research coverage, corporate access, trading / market making, as well as ongoing M&A and capital markets advisory services. In totality, we hope that’s how we earn our gross spread.

IPO Edge: Are you selective in the clients you choose?

Mr. Fisher:  Yes. There’s a reason why we aren’t the highest-volume underwriter. We never have been and I don’t believe we ever want to be. There are underwriters who collect the 2{efe5d79870c08482e17ab0c97855f89429dac5f22c46026d3ca83573faec2208} upfront gross spread on the IPO and hope for the best on the back-end with little support or engagement along the way. That approach is conducive to leading the league tables in SPAC IPO issuance, but that’s not our focus here at Cowen. A traditional IPO consists of an offering and then the transaction is complete. Our view is that while the SPAC IPO gets you through the first inning of the game, you still have eight more innings to play. Some firms who underwrite SPACs just don’t have the infrastructure to be as supportive during the “middle innings” and back-end.

Cowen also doesn’t cover all industries. If we don’t line up well from an investment banking, research and capital markets perspective with the industry focus of the SPAC, Cowen is likely not the best underwriting partner. Our focus continues to be on achieving successful merger outcomes for our SPAC sponsor partners who line up with Cowen’s industry DNA.

IPO Edge: What else is important to know about a SPAC vs. a regular-way IPO?

Mr. Fisher:  In a regular-way IPO, it’s very often 100{efe5d79870c08482e17ab0c97855f89429dac5f22c46026d3ca83573faec2208} primary. SPAC mergers can have a significant secondary percentage.

That’s important if you think about what inning we are in of this bull market. For an issuer to achieve secondary liquidity on the traditional IPO path, it’s typically a two-step process: IPO, all primary, followed by a secondary at some point down the road. In a SPAC merger, you can condense this two-step process into one. In this market, partial de-risking on the first transaction rather than waiting for a secondary offering is currently attractive to private company shareholders.

IPO Edge: How do you feel about helping SPACs find targets when you weren’t already with them at the IPO?

Mr. Fisher:  SPACs who have completed an IPO with another underwriter do approach us seeking assistance on deal sourcing, which is completely natural. Once a SPAC completes its IPO, the sponsor team can and should reach out to every potential deal source seeking a merger target. Cowen, as I’m sure other SPAC underwriters do, prioritizes its deal flow for those SPAC partners for whom it has been IPO underwriter.

As previously mentioned, we are selective on the total number of sponsor teams we underwrite, especially in any one particular sector. Each SPAC process from IPO to completion is very consuming. To give each SPAC sponsor team the attention they deserve, it takes a village. We have to be thoughtful about how we commit that village.

IPO Edge: Warrants are dilutive. Do you see a trend of warrants being redeemed early to reduce dilution?

Mr. Fisher:  There are differing views in the market regarding the perceived overhang of those warrants. In some cases, you’ll have PIPE investors require the warrants to be fully or partially tendered at the close of the merger with some of the cash proceeds raised in the transaction.

IPO Edge: Occasionally SPACs have affiliations with asset managers. Why is that a smart strategy?

Mr. Fisher:  Roughly one in five SPACs issued last year has been affiliated with an alternative asset manager. We certainly understand the appeal to potential targets, as a SPAC with a connection to a committed capital source can increase perceived certainty on the back-end.

You might ask, why are funds that are historically structured to be private investors sponsoring these vehicles?

Answer #1 is speed to market / raise capital: When compared to a traditional committed capital raise, a SPAC can be raised in just three months versus what could be a year plus in traditional committed capital raise.

Answer #2 is time to realization: A SPAC sponsor closes one deal and receives equity, before any capital appreciation, equal to 20{efe5d79870c08482e17ab0c97855f89429dac5f22c46026d3ca83573faec2208} of the SPAC’s shares outstanding with an illustrative 36-month realization timeframe from SPAC IPO to lock-up expiration. If you compare that with a carried interest model and European waterfall economics in a traditional committed PE fund, it’s relatively attractive.

Mr. Fisher is a Managing Director in Cowen’s TMT investment banking team and is also Co-Head of Cowen’s SPAC business. With over 20 years of experience, Mr. Fisher joined Cowen from Morgan Joseph TriArtisan, where he was a Managing Director focused on the technology and media sectors. Previously, he worked at ABN AMRO in the mergers and acquisitions group and ING Barings Furman Selz in the media & entertainment investment banking group. Mr. Fisher holds a BS in finance from Lehigh University. Contact:


IPO Edge Contact:

John Jannarone, Editor-in-Chief

Twitter: @IPOEdge

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