Wednesday, December 23, 2020 6:41:28 AM
CAP's vs SPAC's
Evercore looking to tweak SPAC model with 'CAPS' offerings
Evercore Inc. has been wary of working on special deals historically, but that changed in 2020 as the vehicle became more legitimate, management said during the company's third-quarter earnings call.
Special purpose acquisition companies, also known as blank-check firms, often have incentive structures that do not align the SPAC sponsor and its investors, Evercore co-Chairman and co-CEO Ralph Schlosstein said. Evercore underwrote a blank-check IPO in the third quarter using a new structure the executive said would dilute investors less, a product the company called a CAPS: capital which aligns and partners with a sponsor. A typical SPAC IPO might give the sponsor 20% or more of the ownership after the offering closes, and sponsors are free to sell shares immediately.
"There's a big amount of dilution that goes to the sponsor just for doing a deal, which is quite different from more private equity-brand incentives where the returns to the sponsor are tied to the returns to the investment," Schlosstein said, according to a transcript. "So we created the CAPS product, which does that — aligns the interest of the investors and the sponsor to a much greater degree."
In Evercore's first CAPS IPO, for former U.S. House of Representatives Speaker Paul Ryan's Executive Network Partnering Corp., the firm's founders had a 5% ownership stake in at first, and the founder's shares are designed to convert into regular common shares only when the blank-check firm's publicly traded shares appreciate enough to hit certain thresholds. A second CAPS offering is in the works, Schlosstein said.
"In the last six to 12 months, a merger into a SPAC has become a quite legitimate way of introducing a company into the public markets and ultimately taking it public. So we're finding increasingly with our clients that are private that a consideration of capitalization alternatives includes a regular-way IPO, direct listing, merger with a SPAC or sale of the company," Schlosstein said.
"It's part of, and important to, our equities advisory business to be experts in SPACS," co-Chairman and co-CEO John Weinberg added, according to a transcript.
The SPAC market has exploded in 2020 after beginning to build momentum in the preceding two years. More than 80 blank-check firms have gone public in 2020, raising more than $35 billion, according to an S&P Global Market Intelligence analysis.
Evercore looking to tweak SPAC model with 'CAPS' offerings
Evercore Inc. has been wary of working on special deals historically, but that changed in 2020 as the vehicle became more legitimate, management said during the company's third-quarter earnings call.
Special purpose acquisition companies, also known as blank-check firms, often have incentive structures that do not align the SPAC sponsor and its investors, Evercore co-Chairman and co-CEO Ralph Schlosstein said. Evercore underwrote a blank-check IPO in the third quarter using a new structure the executive said would dilute investors less, a product the company called a CAPS: capital which aligns and partners with a sponsor. A typical SPAC IPO might give the sponsor 20% or more of the ownership after the offering closes, and sponsors are free to sell shares immediately.
"There's a big amount of dilution that goes to the sponsor just for doing a deal, which is quite different from more private equity-brand incentives where the returns to the sponsor are tied to the returns to the investment," Schlosstein said, according to a transcript. "So we created the CAPS product, which does that — aligns the interest of the investors and the sponsor to a much greater degree."
In Evercore's first CAPS IPO, for former U.S. House of Representatives Speaker Paul Ryan's Executive Network Partnering Corp., the firm's founders had a 5% ownership stake in at first, and the founder's shares are designed to convert into regular common shares only when the blank-check firm's publicly traded shares appreciate enough to hit certain thresholds. A second CAPS offering is in the works, Schlosstein said.
"In the last six to 12 months, a merger into a SPAC has become a quite legitimate way of introducing a company into the public markets and ultimately taking it public. So we're finding increasingly with our clients that are private that a consideration of capitalization alternatives includes a regular-way IPO, direct listing, merger with a SPAC or sale of the company," Schlosstein said.
"It's part of, and important to, our equities advisory business to be experts in SPACS," co-Chairman and co-CEO John Weinberg added, according to a transcript.
The SPAC market has exploded in 2020 after beginning to build momentum in the preceding two years. More than 80 blank-check firms have gone public in 2020, raising more than $35 billion, according to an S&P Global Market Intelligence analysis.
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