RESTAURANT SPAC UPDATE – A QUICK ROAD TO RICHES IT IS NOT
The excitement in the marketplace relative to SPACs (Special Purpose Acquisition Corporations), as evidenced by the chart shown just below, has clearly abated (as we have repeatedly suggested over the last six months).
Readers can find more extensive discussions about the individual situations discussed below by using the SEARCH function on our Home Page.
Of the restaurant related SPACs:
The only completed deal, BurgerFi (BFI), is trading almost 50% down from its high and below the $10 IPO price of the original SPAC.
Fast Acquisition Corp II (FZT), (USHG), Tastemaker (TMKR) and Bite (BITE), are sitting on a total of almost one billion dollars (which can be leveraged), are looking for deals at an acceptable price, and one that will excite the shareholder base that has to approve the transaction. However, with the stock price below the $10 IPO level, the opportunity must be compelling, or the shareholders will choose to redeem their ($10/share) funding.
Do It Again (DOITU) and Sizzle (SZZLU) have yet to be funded.
Only Fast Acquisition Corp (FST) is trading above the IPO price, about 20% higher, with the Fertitta deal pending. Even here a great deal can happen in the marketplace by the time the SEC approves the proxy material and the shareholders vote.
Bottom Line: SPACs have been very productive for some, but, as usual, the “early adopters” will have been most fortunate. Later participants are finding that the process is riskier (because Sponsors have to fund the SPACs organizational expenses), the IPO process takes longer, the search process is tedious (especially when competing with many other bidders), and the business combination may or may not be approved by shareholders. Even then, long term success is not assured and the liquidity process for Sponsors is not always easy. Some Sponsors and SPAC investors will do just fine, and they likely will have earned it.