The Special Purpose Acquisition Company (SPAC) market has come back to life after a series of issues slowed the market for new transactions, ranging from a glut of transactions to SEC accounting changes that required restatements and private investment overloaded with public capital (PIPE) market.
But that looks different from what it was in 2020 and early 2021, when flying taxis and spaceships were funded. Today, the market is more sophisticated and more demanding and the PIPE market is more difficult, which has a significant impact on the success of de-SPAC transactions.
Some of the recent successes – Skillsoft, Lucid, and WeWork – are companies with established business plans and committed long-term investors. These non-PSPC businesses are linked to post-pandemic favorable winds, ESG fervor, conscious brands, and resilient consumer trends. These themes will continue to play a role as other recently announced PSPC mergers, like the combination of Waldencast with popular skincare brand Obagi, and Generation Z-focused milk makeup nears completion.
From our work in capital markets, Gladstone Place Partners sees five key lessons for successfully navigating the de-PSPC process.
1. Amplify strong stories
Businesses in de-SPAC mode need a good, believable narrative to highlight how their growth fits into the larger business landscape.
Edtech is one example. Skillsoft had a strong business transformation story to tell and benefited from favorable market winds as more organizations embraced the importance of digital learning during the pandemic. Churchill II combined Skillsoft with Global Knowledge to create a new leader who could harness the massive digital learning market further fueled by the pandemic, drive profitability, and deliver shareholder and customer value.
This combination of an improved business and a favorable market has mitigated some of the criticisms that pre-revenue PSPC merger targets have faced.
2. The CEO as chief narrator
The strength of the company’s story won’t get you far. Businesses need a powerful narrator to deliver key messages. Sarah Friar of Nextdoor and Anthony Noto of SoFi have been strong advocates for their companies from the announcement of the PSPC merger until the close.
Friar has appeared at Fortune’s Most Powerful Women Summit, challenging the “growth at any cost mentality” of other social media platforms, and on Bloomberg TV. Brother has also engaged in a variety of other opportunities, including Yahoo! Finances, the Financial Time and more around the closing of the transaction, inspiring confidence in his leadership across the media and investors. Noto inspired similar confidence in his leadership from CNBC’s Jim Cramer and other market commentators, leveraging a strong pipeline of business news between the merger announcement and the closing of his role in as the face of the business, providing updates via CNBC, Reuters, Quartz and more.
3. Build third-party support
Another characteristic of a successful SPAC is the role of third party investors and others in the transaction and the communication media.. WeWork not only featured the main sponsor of SPAC and other PIPE investors in company documents, but those investors were also sharing their support for the company, including through the media.
Prominent real estate investor Barry Sternlicht, an investor in WeWork PIPE, was quoted in the release and appeared on the air around the announcement of the merger. His views have been widely read and disseminated in the media and among investors. Main SPAC sponsor Vivek Ranadivé also spoke with CNBC on the day of registration.
Prior to closing the merger, WeWork also announced a strategic investment from Cushman & Wakefield, further expressing support for the transformed business.
4. Focus on voting
To complete a PSPC merger, the listed entity must obtain a quorum of shareholders voting yes to the transaction, which can be particularly difficult if a PSPC has a high percentage of retail shareholders in the stock.
It is important for a business to understand who its owners are on the date of registration and how to reach them. Since retail investors are not as familiar with the process as institutional investors, they may need more focused education and guidance.
In the case of Lucid’s merger with Churchill IV, the vote took place in the last few hours – the stock was owned by a significant number of retail shareholders, so they had to get a high number of votes to close the deal. ‘case. Effective and proactive communications, especially on social media, have helped Lucid reach retail shareholders in the final hours to tell them they need to vote and show them how, which has been crucial in closing. the case.
5. The day of listing as a brand event
Businesses reaching out to de-PSPC should view registration day as a major branding moment and an occasion to celebrate employees.
Lucid and WeWork both ran ringing ceremonies and held employee recognition celebrations to mark the moment. Lucid also showcased his cars all over New York City.
Ultimately, thoughtful strategic communications, grounded in a strong narrative and spokesperson, help a company to successfully eliminate PSPC and start its life as a publicly traded company on a solid foundation.
This content is provided by Gladstone Place Partners and does not imply RI Magazine journalists. For more information on Gladstone Place partners, please Click here.