Jason Lin
During “Peak SPAC” early this year, the SPAC market gained significant attention from media and investors alike, and with good reason – there have been 329 new SPACs formed so far in 2021, up from 248 in 2020 and 59 in 2019. However, after the SEC issued new accounting guidance, which would classify SPAC warrants as liabilities instead of equity instruments, there were only 13 new SPACs in April and 18 in May, decreasing from March’s record high of 109 new SPACs.
Despite the new SEC guidance and subsequent slowdown in recent weeks, SPACs are still attractive. Industry insiders now view the SPAC market as healthier and more rational as the more seasoned SPAC management teams are pushing ahead.
The SPAC merger process is still a good way for private companies to project their future revenues and profits, and ultimately achieve a higher valuation. For investors, including hedge funds, family offices, high net-worth individuals, and retail investors, SPACs provide interest while a suitable merger target is identified, while also limiting downside risk. The investment rationale is straightforward, with limited risk and potential for substantial upside when a high potential merger candidate is found – as was the case with Mountain Crest Acquisition Corp. and Playboy.
In February 2021, Playboy (PLBY) returned to the public markets for the first time since 2011 through a SPAC merger with the blank check company – Mountain Crest Acquisition Corporation. Mountain Crest raised $50 million through an IPO in June 2020 and agreed to purchase Playboy Enterprises for roughly $381 million in February 2021. PLBY stock initially opened at $14.54/share on February 11th, and closed at $43.11/share as of May 26th. This wildly successful deal made Playboy a star of the public markets again and delivered excellent investment returns for Mountain Crest SPAC investors.
Just recently, the same team behind Playboy’s hot go-public deal filed with the SEC to raise $50 million in an IPO for Mountain Crest Acquisition Corp. IV, its fourth SPAC. Mountain Crest Acquisition IV is led by CEO, CFO, and Chairman Dr. Suying Liu. Network 1 Financial Securities is the leading underwriter on the deal.
In addition to Playboy, firms that have gone public over the past year through SPAC deals include Virgin Galactic, DraftKings, Lordstown Motors, Nikola Corp, and Fisker Inc. After the SEC warning, fewer private firms are jumping at the chance to go public via a SPAC, but there are still good SPACs staying the course.
