SPAC IPOs Show Time Is Money With Faster Deal Chases

(Bloomberg) — SPAC bosses find themselves needing to speed up their deal hunting if they want to attract investors these days.

About half of blank-check companies that have filed for U.S. listing since early June give themselves an initial period of 18 months or less to find a takeover target, according to data collected by SPAC Research. That is a big change from earlier in the boom, when more than 80% set the default maturity at 24 months.

Stock buyers become more selective as the market for special-purpose acquisitions cools, making it more difficult for lesser-known issuers to raise capital. Hedge funds that invest with borrowed money are more likely to bet on an unproven team if they can profit quickly – or at least get their money back quickly if they fail.

“It’s hard to price IPOs with so many people in the market,” said Nicholas Skibo, managing partner at Gritstone Asset Management, which invests in SPACs. “So you either have to be a world-class sponsor or you have to provide an incentive.”

Time Crunch

Seasoned dealmakers from former Facebook Inc. director Chamath Palihapitiya to billionaire investor Paul Singer are still taking their time with their latest SPACs, giving themselves two years to find a target. Newcomers promise to make a deal in half that time, with many of the SPACs that unveiled listing plans last week planning to merge with a private company within 12 months.

The shorter maturities help these blank check companies stand out among the more than 300 SPACs waiting to sell stock in New York. A SPAC I Acquisition Corp., led by former Franklin Templeton Investments CEO Claudius Tsang, is one of the new leaders. The goal is to raise $80 million to buy a company in the technology or e-commerce industry in Asia.

Neo Technology Acquisition Corp. and Singularity Acquisition Corp., both run by little-known Chinese dealmakers, also have just a year to find a target. Both can be renewed multiple times, each time by three months, if they cannot find a deal within the first period and their sponsors deposit more money into a trust account.

Investors Demand

According to Jennifer Deason, the chairman of Belong Acquisition Corp, the duration of blank check companies will be a topic that investors will come back to.

“It’s the market,” Deason, whose company began trading with blank checks in July, said in an interview. “There are many SPACs and the pendulum is swinging back and forth in terms of supply and demand.”

The shorter deadlines mean these new blank check companies have deadlines closer to those of SPACs already on the list, said Steven Halperin, co-head of capital solutions at investment bank Moelis & Co. However, the advantage for serial deal makers is that they may not need too much time to close a deal.

“For a returning publisher, the sponsor already has the experience and possibly a shortlist of goals needed to complete the SPAC lifecycle in a shorter time frame,” Halperin said.

(Corrects Belong Acquisition Corp. name in 8th grave)

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