DJ There's an A-Rod SPAC Coming Up. It Isn't Just for Yankees Fans. -- Barrons.com
New York Yankees great Alex Rodriguez is taking a swing at a special purpose acquisition company, filing with the Securities and Exchange Commission on Thursday night to raise $500 million in a blank-check initial public offering.
The SPAC will target companies "in the sports, media, entertainment, health and wellness and consumer technology sectors," according to its prospectus. It ruled out professional sports franchises.
Often referred to as blank-check companies, SPACs raise money from investors in an IPO to later put toward a merger with an operating company. Sponsors are tasked with identifying a target company and negotiating a deal to take it public via a merger with their SPAC.
The SPAC is called Slam Corp. -- Rod holds the MLB record for career grand slams, with 25 -- and its stock will trade under the ticker SLAM. At its IPO, the SPAC plans to issue $10 units (SLAMU) consisting of one common share and one quarter of a warrant (SLAMW). The warrants, essentially call options, are exercisable at $11.50 after the SPAC's potential merger closes. Within a few months of going public, Slam Corp.'s units will split, and shares and warrants will be able to trade separately.
The SPAC's sponsors are Rodriguez's A-Rod Corp. and the hedge fund Antara Capital. The 14-time MLB All-Star-turned entrepreneur and investor will serve as Slam Corp's CEO and Antara's founder and CIO Himanshu Gulati will be chairman of the SPAC's board of directors. Other directors include Jagdeep Singh -- founder and CEO of battery-maker QuantumScape (QS), which went public via a SPAC last year -- while Jet.com founder and former Walmart (WMT) e-commerce CEO Marc Lore will be a special advisor.
Barron's has advised caution regarding SPACs where the main selling point was a loose affiliation with some celebrity or quasi-celebrity. Basketball legend Shaquille O'Neal, rapper Jay-Z, and many other big names are involved with SPACs in some capacity. But Slam Corp. appears to be about more than just A-Rod's star power. Antara's institutional backing is a plus, as are the SPAC's directors' and Lore's operating experience and industry connections.
"Our selection process will leverage Mr. Rodriguez's extraordinarily powerful network and personal influence, as well as our Founding Partners' ecosystem of management teams at public and private companies, entrepreneurs, investment bankers, private equity and venture capital fund sponsors, attorneys, and consultants," reads the prospectus.
The $500 million offering of 50 million units includes an underwriters' overallotment option for another 7.5 million units, which could bring the SPAC's IPO total to $575 million. The offering's joint book-running managers are Goldman Sachs and BTIG.
As is typical in SPAC transactions, A-Rod Corp. and Antara get to purchase founder shares equal to about 20% of its total for a negligible amount. They have also committed to purchase an additional 10.3 million to 11.3 million warrants for $1.50 each in a private placement, depending on the size of the IPO. That means they will benefit more from the upside of a well-received deal, but could create more dilution for other shareholders.
SPACs exploded onto the scene in 2020, thanks to a flood of liquidity, a frothy market, and an insatiable appetite among investors for new public companies. 248 SPACs raised $83 billion in IPOs last year, according to the SPAC Insider, a website devoted to research, analysis, and data about the industry. Another 118 have already gone public in 2021.
Companies including DraftKings (ticker: DKNG), Nikola (NKLA), QuantumScape, and Virgin Galactic (SPCE) have been among the highest-profile products of SPAC mergers.
Slam Corp is entering a crowded field. There is competition for the best deals, making it possible for companies to play SPACs off against one another. Not everyone will see the offering as a grand slam, but plenty of people didn't believe in the 2009 Yankees either.
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(END) Dow Jones Newswires
February 05, 2021 15:03 ET (20:03 GMT)
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