Special Purpose Acquisition Companies or SPACs are owning 2020, so let’s discuss some of the best SPACs to buy.
If you are not familiar with what they are check out this article where we break them down in detail. In short, a SPAC is a blank check public company with the sole purpose of finding an acquisition company.
In the past, SPACs were considered risky or were viewed with some suspicion. The SPAC process — to go public through a reverse merger — presents a scenario of reduced regulator scrutiny compared to the traditional IPO. Because of this, SPACs were often considered the sneaky back door into the public markets.
However, 2020 has turned the reputation of SPACS on its head. Now, this once shady vehicle is being used by Big Tech to keep funds away from banks and hedge funds, which is in large part due to a horribly expensive IPO process.
Many large tech companies have felt like their loyal employees, some of who have been around since the garage days were robbed by the IPO process.
So, enter the SPAC. It is now good enough for Bill Ackman and Richard Branson, so it is good enough for us here at the Stock Dork. Below you can find a list of the best Special Purpose Acquisition Companies to check out that we are keeping on our watchlist.
List of the best SPACs To Buy
Super SPAC ALERT: Pershing Square Tontine Holdings (PSTH)
This would not be an article on SPACs if we did not mention Bill Ackman’s investment vehicle. The blank check company has raised $4 billion in its search for a “mature unicorn” or as Ackman himself put it: “We’re a unicorn looking to marry another unicorn.” Excuse us.
Airbnb reportedly turned down a bid from Ackman and Pershing Square Tontine.
This is the second time SPAC for Pershing Square. The company also served as co-sponsor of Justice Holdings, with Nicolas Berggruen and Martin Franklin. In April of 2012, Justice Holdings purchased from 3G Capital a 29% stake in Burger King Worldwide Holdings Inc. for $1.4 billion in cash and subsequently merged with Tim Hortons, to form Restaurant Brands International.
Pershing Square is still one of the largest shareholders for the above company.
This SPAC is interesting because of its structure. It is modeled after a 17th-century investment trust (a “tontine”) where if unitholders elect to redeem shares at the time of the merger, they will forgo receiving the final of their warrant distribution (2/9ths of a warrant).
These forfeited warrants will then be returned for re-distribution to the remainder of the unitholders who did not redeem.
Furthermore, Ackman did not write in a founder’s fee. He is truly betting on himself here and he is doing all the media to make it happen. Do you really think he is not going to close a deal? PSTH is probably the SPAC to buy before a merger.
TWC Tech Holdings II Corp (TWTCU)
This SPAC deal still has the ink wet on the IPO. The sponsor for this company is True Wind Capital, led by Adam Clammer and Jamie Green.
According to reports, the two are targeting the technology and technology-enabled services sectors and a deal value of $1B-$10B.
True Wind’s previous endeavor is why we are salivating over this one.
The sponsor’s previous SPAC was Nebula Acquisition, which merged with Open Lending in January of 2018.
The stock has doubled since that combination and since July 1st of 2020, the stock is up 41%. We love this as one of our best SPACs to buy!
GigCapital2, Inc. (GIX)
GIX has a $224 million market cap and $172 million in trust cash. The 18-month period expires on December 10th. The company was founded by Dr. Avishay S. Katz, and he is no stranger to wheeling and dealing.
Dr. Katz sold GigOptix / GigPeak. Inc. to Integrated Device Technology (IDT) in 2017 for $250 million in an all-cash transaction.
Social Capital Hedosophia Holdings Corp. III (IPOC)
Social Capital’s Chamath Palihapitiya and Ian Osborne, the CEO of Hedosophia, started two SPAC companies together.
IPOC is the larger of the two SPAC babies, and it is a Palihapitiya vehicle that interests us.
In a recent interview, Palihapitiya stated: “Our mission is to create an alternative path to a traditional IPO for disruptive and agile technology companies to achieve their long-term objectives and overcome key deterrents to going public.”
Now, the way to think about these two SPACs is like this: IPOC (market cap $1.2B) is a unicorn hunter and IPOB is looking for a middle-tier tech company (market cap $667.9M), which it did with the acquisition of OpenDoor – more on that below.
So, why do we have faith in Palihapitiya? Well, first, he pretty much engineered the SPAC frenzy on Wall Street, espousing it as a third door for tech companies to go public and not get ripped off through the traditional IPO process.
Second, track record. In 2019, Social Capital made $1.7 billion from Slack, which went public from a direct listing, and Virgin Galactic, which went public through a SPAC.
Virgin Galactic, Richard Branson’s space tourism company, has appreciated, currently trading above $16 at the time of writing.
Palihapitiya has the connections in Silicon Valley to make a big splash. This is certainly one of the best SPACs to buy as there is reason to think the management team can pull a big fish into the boat.
Churchill Capital Corp. IV (CCIVU)
As most readers will understand, SPAC investing is about putting your money on the jockey and not the horse. In the world of SPAC jockeys, David Klein is a Triple Crown winner.
Apart from the analogy, Klein and Churchill Capital have a franchise of SPACs and this fourth SPAC is looking to raise $1 billion.
If anyone can do that, its this management group. Here is a rundown of the previous Churchill Capital SPACs.
- Churchill Capital Corp. raised $690 million and acquired Clarivate PLC in May of last year. The latter was a successful scientifically-focused analytics company that looked to commercialize data to the scientific community. Since the reverse merger, Clarivate (CCC) has done nothing but run upward, now trading above $25.
- Churchill Capital Corp II raised $600 million and it is still searching for a company to acquire.
- Churchill Capital Corp. III just closed a deal to acquire MultiPlan for $11 billion, making it the largest SPAC deal ever. The target company is an analytics company in the healthcare sector.
So, now that you know a little about Klein and Churchill, here is what is planned for IV:
“The company plans to target industries with compelling long-term growth prospects, opportunities to affect valuation improvements, attractive competitive dynamics, and consolidation opportunities,” Renaissance Capital reported. “It plans to target businesses with competitive advantages, significant streams of recurring revenue, opportunity for operational improvement, attractive steady-state margins, high incremental margins, and attractive free cash flow characteristics.”
Klein is a seasoned dealmaker and he can tip the scales toward big deals.
We would be paying attention to his next move especially since the whole tech space is looking toward SPACs. This is definetly a top SPAC to buy if you have room in your portfolio.
Best SPACs To Buy: List of SPACs That Just Closed
Tortoise Acquisition Corp. (SHLL) | Merging with Hyliion
SPACs and EVs are a match made in heaven—just check out SPAQ and Fisker or Canoo and Hennessy Capital Acquisition Corp IV—and now SHLL and Hyliion will merge. The merger brings an electric and hybrid powertrain for commercial trucks to Wall Street.
Thomas Healy is the founder and the first product will allow major Class 8 truckmakers to fit Hyliion’s powertrain into their existing manufacturing process, but the second product is a full truck called the Hypertruck ERX.
The ERX is slated to begin trials next year and will ramp full production the following year. What makes the ERX exciting is that has a small battery pack that can be charged onboard by a natural-gas-fired generator. It is a unique setup that saves truckers weight.
In a move similar to Fisker, Hyliion has no plans to manufacture the trucks themselves, and instead will use auto-industry veteran supplier, Dana, to produce and ship Hyliion trucks.
This deal had polish written all over it as Tortoise, Based in Kansas, prides itself on frugal and thoughtful investing, or as their prospectus said,” a disciplined investment framework, with expertise that spans across the entire energy value chain in addition to sustainable infrastructure, including wind, solar and battery storage assets and social infrastructure.”
“One of the criteria we established early on was that the SPAC was about deploying growth capital,” says Vince Cubbage, CEO of Tortoise Acquisition Corp., which went public in March 2019. “We weren’t going to do a deal where all of our money was going to a seller. We wanted to buy in, not buyout.”
Looks like Tortoise got what it was looking for and the investment community is pretty excited about the merging—which may be due to a run on EVs—as the stock is up +140% since the merger was announced.
Social Capital Hedosophia Holdings Corp. II (IPOB) | Merging with Opendoor
News broke recently that IPOB is acquiring Opendoor, a property technology company that buys homes from sellers and then resells them. Essentially, like a house flipper with an algorithm, but the larger goal of the company is to make home-buying and selling a simple process. According to company materials, Opendoor’s platform can cut 100 days from the selling process.
The stock shot up more than 22% after the deal was confirmed. According to the release, the transaction values Opendoor at an enterprise value of $4.8 billion and is expected to provide up to $1.0 billion in cash proceeds, including a fully committed PIPE of $600 million and up to $414 million of cash held in the trust account of IPOB.
“We founded Opendoor to make it simple and instant to buy and sell a home, to delight customers and make their lives less stressful, and to build an iconic, once in a generation company. This is one of many milestones towards our mission and will help us accelerate the path towards building the digital one-stop-shop to move,” company founder, Eric Wu said about the deal.
Opendoor currently operates in 21 markets across the U.S., including cities such as Phoenix, Dallas-Fort Worth, Raleigh-Durham, Atlanta, and Orlando.
Trine Acquisition Corp. (TRNE) | Merging with Desktop Metal
These shares are still affordable even though we have started the De-SPAC process.
TRINE has combined with Desktop Metal in a very interesting play on 3d printing technology.
Desktop Metal is a turnkey additive manufacturer, which means this company is not making plastic toys at the zoo.
No way. DM, the ticker they will trade under, focuses on industrial uses like automotive and aerospace where designs that could only be produced on such printers create more efficient parts with less weight.
Desktop Metal’s customers are very prestigious: Ford, BMW, Lockheed Martin, and Georgia-Pacific.
The company has even said that they could replace CNC machining and casting for many common parts in the near future as they increase scaling efforts.
Flying Eagle Acquisition (FEAC) | Merging with Skillz
Harry Sloan and Jeff Sagansky have a stellar track record in the SPAC space. This is the 6th public vehicle for the duo, and most people thought a streaming company was ideal for the two Hollywood veterans.
Their other SPACs — Diamond Eagle Acquisition, Global Eagle Acquisition, Silver Eagle Acquisition, Double Eagle Acquisition, and Platinum Eagle — raised more than $2 billion.
In fact, DraftKings merged with Sloan and Sagansky’s Diamond Eagle Acquisition late last year (so, the pedigree is real).
But, the original business filing for FEAC did state (bolding is my own): “While we may pursue an initial business combination opportunity in any industry or sector, we intend to capitalize on the ability of our management team to identify, acquire and operate a business or businesses that can benefit from our management team’s established global relationships and operating experience. Our management team has extensive experience in identifying and executing strategic investments globally and has done so successfully in a number of sectors, including media and entertainment.”
So, maybe we should not have been surprised when FEAC reached a deal with the competitive gaming company, Skillz. The company netted a valuation of $3.5 billion about 15x its projected 2020 revenue.
Skillz hosts and operates tournaments for thousands of game developers.
It has 40 million users and the company said it will host two billion amateur eSports tournaments this year, generating more than $1.5 billion in entry fees.
Skillz CEO Andrew Paradise said this about why they decided to go the SPAC route: “The SPAC route allows us to go to market a little bit faster, and it also allows us to select the best financial partners through the PIPE that we set up.”
Best SPACs To Buy: SPAC Calendar
Here is a list of SPACs not mentioned here that are closing soon and may draw interesting deals.
Schultze Special Purpose Acquisition Corp. (SAMA) – expiring on September 30th, 2020.
Tuscan Holdings Corp. (THCB) – expiring on December 6th, 2020.
That makes up our list of SPACs to buy and SPACs to watch in the weeks ahead.
Best SPACs To Buy: Final Thoughts
SPACs are certainly the most popular “third door” on Wall Street right now, and, honestly, there are plenty of companies waiting in the wings. CB Insights currently counts 474 unicorn companies worth over $1,535B. Some of those names have already been on the tip of Wall Street’s tongue like JUUL, Stripe, DoorDash, SpaceX, and Airbnb. just to name a few. In short, SPAC Season is just beginning.
Did we miss any SPACS that you all like? Let us know in the comments.