Goldman Sachs famously dubbed 2020 “The Year of the SPAC,” and rightfully so, as a record 247 blank check company IPOs went public in 2020, raising approximately $75 billion, or 53% of the total number of offers and 48% of the overall IPO market by value, according to Deal Point Data. The SPAC carried over into the early part of 2021, with $166 billion in SPAC-led deals announced in the first quarter.
As SPAC deals start to die down from a blistering pace of transactions, now is a great time to catch up with three of the more notable blank check company transactions that took place in 2020—and where they currently stand today.
DraftKings — via Diamond Eagle Acquisition Corp.
DraftKings originally began in 2012 as a daily fantasy sports betting platform before adding online sports betting to its list of offerings.
Formed by SPAC veteran Jeff Sagansky and former MGM CEO Harry Sloan, Diamond Eagle Acquisition Corp. initiated a $3.3 billion three-way merger between DraftKings and its online betting tech platform SBTech in December 2019. The massive deal raised more than $300 million from institutional investors and was completed in April 2020.
Since the merger, DraftKings has enjoyed a steady stock price gain, peaking at around $72 per share in March of 2021—up $62 per share from its debut following the initial merger. At the time of this writing, the stock is valued at $53 per share.
DraftKings is already the market leader in online sports betting, commanding a 30% share.
The company’s stock is expected to continue its rise well into the future, as more states gradually legalize online sports betting and iGaming. Recent deals with entities such as the UFC and Dish Network will serve only to bolster its value further.
Diamond Eagle Acquisition Corp executives have since gone on to form a new blank check company under the name Soaring Eagle Acquisition Corp. The SPAC recently announced a $15 billion deal to bring Bill Gates-backed Ginkgo Bioworks public.
Nikola Corp. — via VectorIQ Acquisition Corp.
Founded in 2014, Nikola Corporation is an American company that has developed a wide range of hydrogen-powered, zero-emission vehicle concepts, ranging from garbage trucks and watersports vehicles to pickup trucks and military vehicles.
Nikola Corp. went public after a reverse merger with VectoIQ Acquisition Corp. in a deal that was valued at more than $3.3 billion. The transaction was funded by VectoIQ cash in trust and a $525 million private placement of common stock at $10 per share. Nikola’s stock surged 446% after the deal’s completion, reaching a high of $93 in June of 2020.
Nikola Corp. Today
Since going public, Nikola has experienced a number of woes that have hindered its value. Several company executives, including founder Trevor Milton, have exited Nikola since fraud allegations were levied against the company by Hindenburg Research, an investment research firm. These allegations were followed by investigations from both the SEC and the Department of Justice, which are still ongoing. The investigations also caused General Motors to back out a proposed 11% ownership share just two months after announcing the deal.
The company’s stock price has responded accordingly, falling to a low of around $9 per share in April of 2021. At the time of this writing, Nikola is currently valued at $17 per share.
Pershing Square Tontine Holdings
In July of 2020, Billionaire investor and hedge fund manager Bill Ackman formally launched Pershing Square Tontine Holdings as a blank check company and eventually raised $4 billion in the IPO—a record amount at the time. The IPO offered 200 million units at $20 per share.
Pershing Square Tontine Holdings immediately became the focus of intense speculation as investors wondered what private company Ackman’s SPAC would eventually acquire. The wait ended up lasting all the way until the summer of 2021.
Pershing Square Tontine Holdings Today
The wait for the blank check company’s target acquisition appears to be nearing the end, as a significant deal with Universal Music Group—the world’s largest music business—seems to be nearing an agreement. The deal would hand Ackman’s entities a 10% stake in a now public Universal—a $40 billion equity value. It would also account for the enterprise value, considering Universal’s debt of about $42 billion. If the deal is consummated, it would claim the top spot as the largest SPAC transaction on record.
For more on Blank Check Companies and Special Purpose Acquisition Companies:
- SPAC Finance: Read about SPAC Finance and how SPACs spurred a reopening of the capital markets during the pandemic.
- SPAC Stocks: Learn about SPAC stocks and their possible advantages and disadvantages regarding investment.
- SPAC IPOs vs. Traditional IPOs: Discover the key differences between traditional IPOs and SPAC IPOs.
- What is a Blank Check Company? How does a blank check company work and does a SPAC count as a Blank Check company?
- Blank Check Company Stock: Investing in a blank check company stock and what to expect with this type of investment.
Considering the record-breaking number of SPACs that have gone public via an IPO, the pipeline for SPAC mergers is bound to break records in 2021.
The coronavirus has halted many IPO plans but SPACs (special acquisition companies) are actually gaining speed. This edition of the D&O notebook discusses how more SPACs will likely lead to more SPAC litigation.