SPACs Version 4.0
June 1, 2010
It may have escaped notice, especially ahead of Memorial Day weekend, but a SPAC managed to price an IPO in May, representing another positive sign for those seeking signs of returning liquidity in a still-spotty market.
57th Street General Acquisition Corp. announced this morning that it floated a total of 5.45 million shares in the offering, including stock and warrants sold as part of the underwriters' over-allotment option, at $10 a share.
The $54 million in proceeds would hardly bring to mind pre-bubble SPACs that were averaging hauls of nearly $300 million in early 2008. What's notable, though, is that 57th Street IPO underscores the constant evolution of the structure, and creates an archetype that does away with the shareholder vote and proxy solicitation.
In the recent past, SPACs have resorted to buying out investors who otherwise would've voted against the deals. That practice, though, only served to encourage the hedge funds targeting blank check companies' conversion rights as an arbitrage play in the first place.
The new structure would seemingly add some certainty into the equation, as sellers no longer have to view a sale to a SPAC as a longshot.
The shareholders, according to one lawyer I spoke to, wouldn't be completely unprotected, as the SPAC will still need to consummate a tender offer to its investors allowing those not interested to recoup their money.
Still, it seems like this tweak to the structure will go a long way in helping legitimize the SPAC as a buyer.
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