The special purpose acquisition company merger momentum continued last week with new deal announcements from dMY Technology Group II DMYD and GigCapital2 GIX.
How SPAC Mergers Work
SPACs are shell companiesg that raise capital in an IPO in order to acquire an existing company and take it public, thereby helping the existing company circumvent the traditional IPO process.
When a SPAC goes public, it typically sells units for $10 each and stores that capital in a trust while its management looks for an acquisition target.
If a SPAC doesn’t acquire a company within a particular time frame — often two years — then its trust is liquidated and returned to its unit holders.
But if it does complete an acquisition, then unit holders can convert their SPAC units into shares of the newly combined company.
Between its IPO and its combination or dissolution, a SPAC will typically trade at a small premium or discount to its trust value, reflecting uncertainty about whether the SPAC will complete a deal. After it announces a merger agreement, the SPAC price typically trends toward the market’s estimated valuation of the company the SPAC intends to acquire.
Two such merger agreements were reached last week — one that involves recycling and manufacturing and one that involves sports betting.
Genius Sports Group Grabs dMY Techology Group II
On Tuesday, Genius Sports Group announced that it is aiming for a public listing through a merger with a SPAC known as dMY Technology Group II.
The company is a London-based sports betting data firm that processes in-game data from many associations, including the NBA, NCAA, English Premier League and PGA.
The SPAC raised $240 million in an August IPO and would contribute up to $276 million — its current trust value. The combined enterprise would be valued at $1.5 billion.
The SPAC gained 1% Monday, closing at $10.11.
The transaction is expected to close in the first quarter of 2021, and the combined company would trade on the New York Stock Exchange under the symbol “GENI.”
GigCapital2 Buys Bolder Industries
The same day, Bolder Industries announced that it had signed an exclusive letter of intent for a business combination with the SPAC GigCapital2.
Bolder Industries converts end-of-life tires into sustainable industrial products for large global end markets, making it an environmentally friendly manufacturer.
GigCapital2 raised $150 million in a June 2019 IPO and would merge with Bolder to form a company worth $880 million.
The stock lost 0.2% in Monday's session, closing at $10.06.
The transaction is expected to close in the first quarter of 2021. No new ticker for the combined company has yet been proposed.
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