Ladenburg Thalmann Reports Oustanding Deferred SPAC Fee Revenue of $41.2 Million, Pending SPAC Acquisition Closings

On August 11, 2008, Ladenburg Thalmann Financial Services Inc. (AMEX: LTS) reported that as of June 30, 2008, the Company had potential deferred fees for SPAC transactions of approximately $41.36 million which, net of expenses, amounted to approximately $24.46 million.

The issue of deferred fees at risk is a fairly large one for Wall Street:

There are currently 22 SPACs approaching closing of their transactions with deferred fees of $91.9 million at risk and 60 SPACs still looking for an acquisition with a whopping $415.1 million worth of deferred fees at risk.

That's an overall average deferred fee of over $6 million per SPAC, shared among, on average, two or three underwriters. Not bad business, if you can get it.

Click here for more statistics, or to search for the SPACs that Ladenburg Thalmann still needs to get across the finish line.

SPACs With Less Than 100 Days to Announce or Close an Acquisition: It's a Fire Sale

As of today, the following SPACs have fewer than 100 days to announce or close their acquisitions. M&A bankers: time to buckle down on those remaining to close. For those SPACs still in the market, might it be worthwhile to lob a call into management to pitch that sell-side you've been working for a while?

For those SPACs that have yet to announce a target for acquisition, the mere act of signing an vague letter of intent that doesn't even disclose the name of the target should be enough to buy another six months

SPACs With Less Than 100 Days Remaining to Announce an Acquisition:

• Churchill Ventures Ltd -- 21 Days remaining
• Oceanaut, Inc. -- 22 Days remaining
• Alpha Security Group Corp -- 43 Days remaining
• Santa Monica Media Corp -- 48 Days remaining
• Pinpoint Advance Corp -- 71 Days remaining

SPACs with Less Than 100 Days to Close an Acquisition:

• Marathon Acquisition Corp has only 15 Days remaining to complete its acquisition of Global Ship Lease
• Energy Services Acquisition Corp has only 21 Days remaining to complete its acquisition of C.J. Hughes Construction and S.T. Pipeline
• Granahan McCourt Acquisition Corp has only 70 Days remaining to complete its acquisition of Pro Brand International, Inc

Source? The SPACInfo.com Database, of course...

Has the SPAC Become a More Viable Exit For Private Equity Portolio Companies?

In an article today, Rick Miller, Terry Childers, Michael K Rafter, Hannah Crockett and Eliot Robinson from Powell Goldstein, LLP argue that:

"Against the backdrop of today's tightening initial public offering and credit markets, private equity firms are finding it increasingly difficult to exit their investments using traditional vehicles. The special purpose acquisition company, or SPAC, presents an intriguing exit opportunity for private equity firms looking to capitalize on the ready capital and flexibility offered by SPACs."

They cite "Flexible Acquisition Terms and Increased Earning Potential, Greater Certainty on Financing, and Pricing and Time Constraints" as good reasons for private equity firms to sell to a SPAC.

Click here for the article

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.

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.

Morgan Joseph SPAC Conference -- Conclusion: Mo Money, Mo Less Problems?

Led by Tina Pappas, A.K.A. the "SPAC Lady", Morgan Joseph held its first annual SPAC conference in New York last week, attracting over 500 participants.

Attendees bemoaned the slowdown, with Richard Heckmann of Heckmann Corp. saying:

"...it seems to me that the SPAC market should be hotter than it is. Tell me a market you can go into where you can't lose money, the worst that can happen is that you'll get your money back."

... and that:

"My advice to a [new] team doing a SPAC is to bring something to the party. It's always about the management, it's always about the team. Money doesn't solve problems, management does..."

Click here for more coverage from Business Wire and TheDeal.com.

David Weidner at MarketWatch Predicts the End of "SPAC Fever", Compares SPAC Backlog to Halloween Hangover

David Weidner at MarketWatch has a forward looking analysis of the "companies, people and events" to shape the markets over the next few months, including SPACs:

"SPACs, or special purpose acquisition vehicles or blank check initial public offerings. These private equity companies wrapped up in an initial public offering have fueled the equity underwriting markets, but like a kid eating candy on Halloween, the markets are ready to hurl. There were 70 of these SPACs registered through April 14, according to The Deal. Many existing SPACs are folding because they can't find good companies to buy or they've met their deadline or both. SPACs made up 88% of the IPO backlog through March 25, according to Dealogic. This looks like the end for SPAC fever and who's going to pay the price? Citigroup, of course, the leading underwriter of SPAC deals."

Click here for the article

April SPAC Acquisition Approvals Breathe Some Life Into SPAC M&A

While SPAC investors and sponsors are taking a little breather along with the rest of the IPO market, SPAC M&A continues to move forward. After a fairly rough start to the year, with five SPACs announcing dissolutions, transactions continue to be pushed through.

Here's the April list:

• Global Services Partners Acquisition Corp acquisition of SouthPeak Interactive. GSP has announced that their shareholder vote will take place on April 24, 2008 (Proxy Here)
• Asia Automotive Acquisition Corp acquisition of Hunan TX was approved on April 17, 2008 (Press Release)
• Jaguar Acquisition Corp acquisition of China Cablecom was approved on April 9, 2008 (Press Release)

SPAC Backlog Thickens, We Start Using the Word "Glut"

There are more SPACs on file with the SEC than have priced since early 2007. By our count nearly 100 SPACs, including foreign SPACs filed on a confidential basis, are waiting for market conditions to improve and move through the review process.

According to TheDeal.com:

"[The] large backlog of about 70 registrations has strained the market’s capacity. “There’s too much supply of issuers and just not enough demand,” said a New York investment banker."

We believe that many bankers, management teams and sponsor groups are taking a wait and see attitude these days, as the equity markets are still roiling from the mortgage crisis, depressing acquisition valuations and the ability of hedge funds to deploy capital.

New SPAC Issues Reported to Decline by 10% in 2008, Nascent Industry Cringes

Reuters is reporting that SPACs IPOs are expected to decline by 10% in 2008.

Barry Grossman of Ellenoff Grossman & Schole LLP is quoted as saying:

"The whole IPO market will be down significantly this year ... There are a lot of SPACs in the pipeline right now and there's so much inventory out there that I can see people saying: 'I have enough SPACS in my portfolio right now; let me look around.' But if you have quality management, those deals are still getting done."

We say that projections that the SPAC market will decline by only 10% are naive, at best. SPAC IPOs this year are already down over 55% vs. the same period last year, and aren't showing any signs of recovery, while a stagnant backlog continues to grow. It ain't shaping up to be pretty.

Click here for more.

Ladenburg Thalmann & Co. Begins Issuing Research on SPACs, First Rating Unsurprisingly a "Buy"

According to DealFlowMedia, Ladenburg Thalmann & Co. has begun issuing research on SPACs, initiating with a "Buy" rating on Marathon Acquisition Corp (AMEX: MAQ). SPAC underwriters will take interest as Ladenburg was an underwriter on the Marathon IPO and currently has the company on out on the road trying to convince shareholders to vote for its deal.

As we mentioned in a recent post on Marathon, Michael Gross announced that he would be buying 12-vessel Global Ship Lease (a subsidiary of CMA CGM S.A. of France) for about $1 billion.

Tracking SPACs: The Morgan Joseph Acquisition Company Index (MJACI) Chart Goes Up and Up

Wow, we sure love charts that go up: Morgan Joseph has a Bloomberg-quoted SPAC Index called the MJACI worthy of checking out for those of you who are looking for a holistic view of aggregated, indexed SPAC performance right up until the point that a SPAC buys a business. Morgan Joseph describes their index as follows:

"MJACI is a market capitalization weighted (excluding promote shares and over allotments) index. MJACI adds newly formed public acquisition companies at their initial offer price and removes an existing acquisition company upon consummation of a business combination. In either event, index weightings are linearly rebalanced. The index is set equal to a base of 100 as of January 1, 2005."

Of course, the index fails to take into account plummeting equity values exhibited by most SPACs following the acquisition, but most of you are probably playing arb strategies and getting out prior to the combination anyways on these things, so what do you care?

Find out more here.

Goldman Sachs Files SPAC, Smugly Claims Moral High Ground

Gee thanks, Lloyd. We all knew the product needed to evolve, but we just couldn't bring ourselves to leap blindly into the unknown. Glad you had the co-jones.

Anyhow, Goldman has finally released the terms of their latest SPAC, filing a $350 million IPO for Liberty Lane Acquisition Corp, helmed by two veteran Private Equity guys, Paul M. Montrone and Paul M. Meister (A.K.A. "The Pauls"), who currently run Liberty Lane Partners LLC

Here's what you, dear SPAC aficionado, need to know:

• First, and gaspingly foremost, Goldman is cutting its fee to 6%. i-bankers everywhere are wringing their hands in distress
• Second, The Pauls are only investing about $3.5 million in the business (1%), but in return will only get a 7.5% promote, far less than the typical management team.

A harbinger of things to come? Further legitimization of the product? You decide.

Here's the SEC Filing

Phoenix India Acquisition Corp: Why this One Is Interesting

On March 7, Phoenix India Acquisition Corp announced that they are going to dissolve after being unable to complete their transaction in enough time.

Says the Chairman of Phoenix India, Raju "Mr. Morgan Stanley" Panjwani:

"...The provisions of ... our Certificate of Incorporation govern our conduct as a special purpose acquisition corporation and require us to, among other things, take action to dissolve and liquidate the Company in the event we have not completed an acquisition by April 5, 2008. We believe that it is in the best interests of the Company to continue the existence of the Company after the distribution of the funds in the IPO trust account to permit us to complete the acquisition of Citius Power Limited. We intend to obtain the funds for that acquisition through a private placement transaction..."

So they're going to use the SPAC as a ShellCo that essentially cost them nothing to put together and reverse merge their private target into it by doing a private placement. Why didn't they just do a reverse merger in the first place? We don't like it, and we don't approve. We can't even look it in the eye.

Here's the filing again

Two More Bite the Dust: SPACInfo Editors Can't Get "Dream of SPAC Liquidation" (Sung to Tune of ChiliPeppers "Californication") Out of Heads

Grubb & Ellis Realty Advisors, Grubb & Ellis's real estate SPAC (obviously), and Phoenix India Acquisition Corp, an India focused SPAC (double obviously) recently filed for liquidation.

PI tried to buy a 65% stake in Indian wind power company Citius Power Limited for $45 million and GERA tried to buy a few office properties from itself (sigh... we're going to stay up late tonight trying to figure out why that one didn't get done)

Neither deal could garner enough votes to get 'er done so both SPACs decided to throw in the towel. Phoenix India, however, comes with a twist, but more on that later...

Phoenix India
Grubb and Ellis

Trendwatch: "Time, Time, Time ... It's (More Than Ever) on My Side"

Here's an interesting trend to watch: Every SPAC filed since Red Star Partners filed its $36 million China SPAC earlier this year has been filed with a possible 30-month+ deadline to find a business to buy. What's the deal with that? Why is that 2 years (yeesh) is no longer enough time to get these things done???

Well, some reasons are: hedge funds holding management over the barrel at the vote, acquisitions getting tougher to close, competition with non-vote predicated money, and founders finally realizing that they, well, sadly aren't the deal jockeys that they thought they were.

Here's an example for you to sink you teeth into: Trian Acquisition I Corp

Trendwatch: Consumer SPAC Bubble?

Judging by the volume of consumer SPACs recently in registration and that have gone public over the past few months, you'd think someone knows something that we don't. (obviously...)

There have been 4 consumer SPACs that have gone public since November of last year and there are 12 consumer-focused SPACs in registration.

Implication? This means that in a year or so, there could be almost $4 billion worth of SPACs chasing consumer companies. This should make for some interesting competitive dynamics.

Goldman Sachs to Float a SPAC, Wineberg and Whitehead add 15th Business Principle: "To Err is Human, to SPAC Devine"

The rumors out of 55 Broad kept coming, but Lloyd, I didn't think this would actually happen. A related question: Will Goldman Sachs somehow find a way to under-price a SPAC to produce a first day pop? Er...

Anyhow, after trashing SPACs as "harmful to investors" (true?), it seems as though they've miraculously decided that -- with a few tweaks -- no further harm will be done under their watchful eyes. Is that my breath that's bated?

Here's the snip from the WSJ:

"Goldman Sachs Group, Inc., the only major U.S. investment bank that has steered clear of underwriting so-called blank-check IPOs, is preparing to enter the business -- but with a twist on the typical structure of the deal, people familiar with the firm's plans say. Goldman for the past year has spurned such deals -- also known as special-purpose acquisition companies, or SPACs -- saying the deal structure wasn't beneficial for investors..."

Click here for more.

Trendwatch: SPAC Founders To Own Smaller Percentages?

In a scary and disturbing turn of events for SPAC founders looking for an easy 10x return on their investment -- no matter how well/poorly they are able to get their acquisition to perform -- investors are asking that they accept a smaller piece of the pie: as little as 15%, down from the traditional 20%. Could it be? ...The humanity!

Some examples:

GHL Acquisition Corp -- 17.5% Founders' Ownership; IPO: Feb 14, 2008
BPW Acquisition Corp -- 15% Founders' Ownership; IPO: Feb 26, 2008

Considering that SPAC founder can still own 15% of a $100 million+ business for only $2-to-$3 million, this still seems like a criminally good deal for SPAC founders.

What are the implications here? Clearly, investors are looking to squeeze SPAC founders, but the reality is that the lower percentage of the business they own, the easier it's going to be to get a deal done when it comes down to the vote. Lower founder ownership = lower dilution to holders when it's all said and done. Ain't that a peach?

Now, rumors are circulating that venerable investment bank Goldman Sachs is preparing a SPAC where the founders will only own around 10%. Details are sketchy at this point, but we're sure we'll be hearing more from the 55 Broads soon.

Coming Soon...

You didn't ask for it, but you're getting it anyways:

• Search All SPACs
• Banking League Tables
• Accounting League Tables
• Legal League Tables
• SPAC trends
• Charts and Diagrams
  

Bear Stearns Bulls it Up...

Really, Schwartz??? Three SPACs filed this week, all within two days of one another? Guess you decided to step it up beyond being a piddly co-manager to the right of Lazard of all things (MVC Acquisition Corp). Welcome to the show, bruh.

Nice take. Fees from $800 million worth of SPACs ($28 million!!) should help cover some of that, what, missing 50% of market value lost since last June? Hopefully the loss of Louis P. Friedman, your beloved chairman of mergers and acquisitions won't put a dent in the ability of these guys to actually get a deal done.

The "Bear" cubs:
Market Street Acquisition Corp -- $350 million
Oasis Group -- $300 million
Sidhu Special Purpose Capital Corp -- $150 million

Update 3/17/08: It wasn't our fault, we swear.

Nasdaq Proposes Minimum Guidelines for SPAC Listings: Submits Guideline to SEC

Now that Nasdaq and NYSE have had their lunch eaten by AMEX for over a year (55 IPOs have priced on the AMEX since the beginning of 2007 -- think of the lost revenue!), they've decided to jump in the game. In contrast to NYSE's more stringent requirements detailed in a previous post, Nasdaq, its less credible, but more liquid little brother, has proposed the following:

• Gross proceeds from the initial public offering must be deposited in an escrow account maintained by an "insured depository institution,"
• Business combination within 36 months
• Business combination using aggregate cash consideration equaling at least 80% of the value of the escrow account at the time of the initial combination
• Minimum market value of listed securities of $75 million on the Nasdaq Global Market; Minimum market value of listed securities of $50 million on the Nasdaq Capital Market

The rise of SPACs leads to changes on Wall Street

Last year SPACs accounted for 26% of the total IPO market and currently comprise seven of the 11 IPOs in 2008. If this isn't the indication of a down market (18 month lows today!!) I don't know what is. Have the equity markets hit their floor???

Click here for more