It’s probably not premature to be asking: is there any company too big to be SPAC’d?
Just today, we saw the trading debut of the most valuable company to date go public through a merger with one of these SPACs: 35-five-year-old, Pontiac, Michigan-based United Wholesale Mortgage, which is among the biggest mortgage companies in the U.S.
Its shares slipped a bit by the end of trading, closing at $11.35 down from their starting price of $11.54, but it’s doubtful anyone involved is crying into their cocktails tonight. The outfit was valued at a whopping $16 billion when its merger with the blank-check outfit Gores Holdings IV was approved earlier this week.
Why is this interesting? Well, first, despite UWM’s size, its path to going public took less than a year, beginning with Gores Holdings IV completing its IPO in late January 2020 and raising approximately $425 million in cash.
Alec Gores, the billionaire founder of of the private equity firm Gores Group, led the deal. The tie-up was announced back in September and ultimately included an additional $500 million private placement. (It’s typical to tack-on these transactions once a target company has been identified and accepts the terms of the proposed merger. Most targets are many times larger than the blank check companies with which they are joining forces.)
Also notable is that UWM is a mature company, one that says it generated $1.3 billion in revenue in the third quarter of last year alone and whose CEO, whose father started the company in 1986, said last fall that the company is “massively profitable.”
It’s a story unlike that of most outfits to go public recently through the SPAC process. Consider Opendoor, Luminar Technologies, and Virgin Galactic. Each is still developing a business that needs capital to keep going and which might not have found much more funding from private market investors.
SpaceX director Steve Jurvetson underscored the point pretty bluntly last week, saying, for example, that Virgin Galactic has seen “no positive business development” since being taken public. “They announced that they’re going to develop a hypersonic plane, but that has zero synergy with the current business they’re trying to launch, which is suborbital spaceflights, which have yet to happen for customers.”
If more profitable, more mature, more businesses with a very clear path to future revenue — more companies like UMW — begin choosing SPACs over traditional IPOs, it could change widespread perceptions of SPAC candidates as businesses that had nowhere else to go.
It could also broaden thinking about what size companies are appropriate to take public this way and lead to much bigger transactions.
More certain: UWM isn’t likely to hold the record for ‘biggest SPAC deal ever’ for long. Not only is interest in SPACs as feverish as ever, but one vehicle in particular seems poised to take the title, and that’s the SPAC of billionaire investor William Ackman, whose blank-check company raised $4 billion last summer.
Presumably, the deal will be a doozy. Reportedly, Ackerman was at one point looking to take public Airbnb with his SPAC. When Airbnb passed on the proposed merger, he reportedly reached out to the privately held media conglomerate Bloomberg. (Bloomberg has said it’s untrue.)
Because SPACs typically complete a merger with a private company in two years or less, speculation has been running rampant about what Ackman — who plans to kick in an additional $1 billion in cash from his hedge fund — will piece together with all that money.
In the meantime, there have been 67 new SPAC offerings in the last 22 days alone — as many as in all of 2019. They’ve raised $19.2 billion. And there’s seemingly no end to the fundraising in sight.
Just this week, Fifth Wall Ventures, the four-year-old, L.A.-based proptech focused venture firm, registered plans to raise $250 million for a new blank-check company.
Intel Chairman Omar Ishrak, who previously ran medical device giant Medtronic, was reported to be planning to raise between $750 million and $1 billion for a blank-check firm targeting deals in the health tech sector.
As for Gores Group, on Wednesday, it registered plans to raise $400 million in an IPO for its newest blank-check company. It will be the outfit’s seventh SPAC to date.