Tina Pappas, SPAC Lady: "The SPAC Market Has Legs"

Tina Pappas, a managing director at Morgan Joseph, was interviewed earlier this month by TheDeal.com.

"'Pappas, who recently married, seems to fit the Wall Street hard-charging mold, working into the wee hours. SPACs keep her occupied for now, but the views are mixed on the SPACs' near-term growth prospects. 'I think the market's got some legs,' Pappas says. 'Any time you have a product that appeals to investors, entrepreneurs and potential targets, that usually means it'll be viable long term.'"

Click here to read the full interview

SPAC Shareholders Vote Against Global Services Partners Acquisition of SouthPeak Interactive, But Transaction Proceeds Anyway. What Gives??

Global Services Partners Acquisition Corp (GSPAC), one of those oddly shaped HCFP/Brenner Securities SPACs with two classes of Units (Series A and B), has proven the ability of the structure to allow management to push through an unpopular acquisition in the face of significant shareholder opposition.

Now that the shareholder vote is complete, GSPAC management is moving ahead with the acquisition of SouthPeak, by returning the trust to shareholders, but keeping the SPAC alive as a publicly traded shell company. SouthPeak will now have to go out and complete a private financing of at least $5 million that values the company at a minimum of $35 million, after which SouthPeak will perform a reverse merger with GSPAC to become a publicly traded entity.

A few key terms are disclosed below:

• SouthPeak and/or the Company shall have completed, contemporaneous with the closing of the definitive agreement, a financing with gross proceeds of no less than $5.0 million;
• the transactions contemplated in the definitive agreement must be consummated by May 31, 2008;
• the total purchase price to be paid by the Company for SouthPeak shall consist solely of common stock of the Company having a fair value of no more than $35.0 million

The SPAC, which raised $30,000,000 in April 2006 by selling 400,000 Series A Units and 2,600,000 Series B Units has an unusual structure in which Each Series A unit consists of two shares of our common stock; and ten Class Z warrants and each Series B unit consists of two shares of our Class B common stock; and two Class W warrants.

Once again, we are not fans of this type of outcome for the SPAC product; it smells awfully like a bait and switch that could be potentially harmful to investors not savvy enough to vote against the proposed acquisition. We don't like the way this trend is going: SPACs that end up as reverse-merger candidate shell companies run contrary to the intended purpose of these instruments, and we believe that the exchanges should be taking a closer look at these outcomes.

Click here for the filing

Granahan McCourt Acquisition Corporation SPAC Announces Merger with Pro Brand International, Likes Antennae

Granahan McCourt Acquisition Corporation (a $90 million SPAC priced in October 2006 -- mentioned in an earlier post) has announced its intent to merge with Pro Brand International, Inc. (PBI) for $75 million in total consideration. Highlights about PBI and the transaction from the press release follow:

• "Designer and developer of advanced antenna and RF systems for the satellite industry
• Initial consideration of $75.0 million includes $55 million of cash and $20 million of stock, plus earnout contingent on performance through 2010
• Granahan McCourt team adds many years of operating and strategic experience and key relationships with companies in Europe, Latin America and Asia, strengthening growth opportunities
• 2007 revenue, EBITDA and net income were $132.0 million, $14.6 million, and $8.7 million, respectively
• Blue chip customer base including leading North American DBS operators
• Multi-pronged growth strategy including further rollout of new products to existing customers, geographic expansion, expansion into related verticals, and pursuit of acquisition opportunities in fragmented market
• Lower P/E, enterprise value to EBITDA, and enterprise value to revenue than publicly-traded comparables"

After the announcement, the common stock briefly traded up to $8.00, but has since dropped to yesterday's close of $7.92, somewhat below cash value in the trust on a per shares basis.

This is not a good sign for the acquisition: How the common trades after deal announcement is a fairly accurate indicator of investors' a) belief in PBI's validity as a acquisition target; and b) confidence that hedge funds will be voting for the acquisition.

Click here for the press release.

2005-2008 SPAC IPO Investment Banking Underwriting League Tables

We've looked at SPAC law firms and we've looked at SPAC accounting firms. We recently even looked at investment banks and their SPAC backlog. Fee-starved investment banks are looking back with wistful eyes to the days of ought-seven and ought-six, so let's help them remember the good 'ol days, shall we?

SPAC IPO rankings follow for all investment banks that have priced at least two SPAC IPOs per year since 2005. Equal credit has been given to all banks on each deal, so you'll see popular co-manager firms like Ladenburg Thalmann and Maxim Group showing up at the top of the lists in later years. Many SPACs underwritten by larger banks like Citigroup, Banc of America, Deutsche Bank and Merrill Lynch enlisted these SPAC experts to help with deal execution.

Trends are obvious here: Bulge-bracket investment banks only begin to enter the picture in 2006, but by the end of 2007 are capturing greater numbers of larger deals, reinforcing the product's credibility with investors and the markets overall.

Europe is Ready to List SPACs, Claims NautaDutilh Lawyer

The WSJ interviews Petra Zijp, co-head of Dutch law firm NautaDutilh’s capital markets team, about whether SPACs will be able to make it outside of of the United States as a viable product.

Here's a snip:

"DJ: So where does the European SPAC market stand now and what do you expect going forward this year?

Petra Zijp: Currently we have two listed SPACs. It is U.S. technology, which in the last 18 months has evolved greatly both in the sense that bulge bracket firms are doing these deals now and the quality of the sponsors has improved.

In Europe we are all set and ready to go. There are a few deals in the pipeline now, but I think Europe is waiting for the first few deals to come out and be a success. And then once people become comfortable with the structure, it will become a European product with European investors and European managers."

Click here for the article

SPAC Backlog Investment Bank Rankings: Who Stands to Lose the Most in Fees?

On the heels of yesterday's post about SPAC S-1 filing activity, we figured that we should give you a sense of which banks are behind the current backlog of filed SPACs waiting to go public. It's who you'd expect, and we left out any banks that only have one SPAC on file because, well, who really cares. If the SPAC bubble truly has burst, Citigroup stands to lose almost $140 million in upfront fees if none of the 13 SPACs it currently has in registration are able to price.

Here's another fact we dug up: All the SPACs in registration represent almost $520 million in upfront fees alone to investment banks with over $1 billion in fees available to banks if deals get done.

The rankings of investment banks with SPACs on file follows with Citigroup, Ladenburg and Lazard taking the top three spots, with 35 SPACs between them.



This ranking does not include foreign issuer SPACs, and only includes SPACs currently available for pricing.

DealBook Incorrectly Claims that SPAC Registrations Have Fallen to a Five Year Low

Yesterday's DealBook claimed that:

"...registrations dipped to a five-year low this month with only three listings for April, as the decline in initial public offerings caught up with the investment vehicles."

While it's true that s-1 filings dropped in April and the market is showing signs of slowing in general, in fact, on a monthly basis, there have been eleven months between January 2006 and today where monthly SPAC S-1 filings have dipped to three or fewer. See our analysis below:

SPAC S-1 Filing Activity: 2006 to 2008

You're asking our source again? Click on over to Edgar, folks.

Now, this isn't to say that SPAC filers are presented with signficant challenges vis-a-vis the growing backlog...Let's face it: With over 75 SPACs currently in registration with the SEC and probably another 20 to 25 foreign issuers filed on a confidential basis, the chances of making it through this backlog intact are slim.

Time to get your act together, Sorkin. Update: Looks like DealBook got our note. Click here for the article.