|Blank check company (SPACS) update|
Wall Street has never been bashful about recycling old products and concepts. One of the recent concepts to be recycled is the blank check IPO. Blank check companies are also known as Special Purpose Acquisition Companies (SPACS).
As of December 11, 2009, 162 SPACS have gone public since August of 2003, raising gross proceeds totaling $22,003,690,655 (give or take a buck or two). Another 67 companies currently have registration statements on file with the SEC and are looking to raise $10,787,120,608 (once again, give or take a buck or two). If you back out the companies that filed their initial registration statements on or before December 31, 2007, there are 27 companies currently in registration that are looking to raise $3,899,000,000. Another 33 companies have filed and withdrawn registration statements; two of these companies subsequently went public on London’s AIM stock exchange, where they raised gross proceeds totaling $381 million. The companies that withdrew their registration statements were looking to raise $6,401,000,000
87 companies have actually completed acquisitions, and another 11 have deals pending. Of the companies that have completed transactions, seven have either been acquired or are in the process of being acquired. There are 59 companies that have failed to close on their proposed acquisitions and have either liquidated or are currently in the process of liquidating. These companies raised a total of $7,050,111,754 in their offerings. The shareholders of ten of these liquidated companies have extended the corporate charters for nine of companies so that they could operate as a shell. One of these companies has actually closed on a transaction.
There are 5 SPACS still looking for deals.
There have been several high profile transactions. The first was the acquisition of Jamba Juice Company by Services Acquisition Corporation International. Freedom Acquisition Holdings subsequently acquired GLG Partners and Endeavor Acquisition acquired American Apparel.
The first of the new crop of blank check companies went public on August 23, 2003.
Of the 80 companies that have completed transactions and have not yet been acquired, the securities of only 24 of these companies are trading above their original offering price and 56 are trading below. The average company is down 15.53% versus an average decline of 5.15% for the NASDAQ Composite. The 7 companies that have either been acquired or are in the process of being acquired are down on average 75.31% versus an average increase of 17.81% for the NASDAQ Composite.
Of the 11 companies that have open deals, the securities of 10 of these companies are trading at or above their original offering price and 1 is trading below. The average company with an open transaction is up 4.72% versus an average decrease of 5.97% for the NASDAQ Composite. The securities of the six companies still looking for a transaction are up 2.20% since their original offerings versus an average decrease of 7.01% for the NASDAQ Composite.
A note on methodology: When calculating the return percentages for each of the companies, I have added the current market value of the applicable common shares and warrants, subtracted the unit cost, and divided the resulting sum by the original unit cost. In those instances where companies have redeemed their warrants, for the warrant value I have used the value that was created through the exercise of the warrant. For example, in December 2007, HLS Systems International (originally Chardan China North Acquisition) redeemed its warrants. The common stock of HLS last traded at $11.97. If you assume that $6.97 of value has been created from each of the two warrants (which had a strike price of $5.00 per share), the original units, which were priced at $6.00 and are no longer trading, now have a value of $25.91 ($11.97 + $6.97 + $6.97). The computation for calculating the return on HLS: $11.97 + $6.97M+ $6.97 - $6.00 = ($19.91) divided by $6.00 yields a return of 331.83%.
I realize that the second calculation does not include the cost of exercising the warrants. If we add the exercise cost of the two warrants ($10.00) to the original cost of the unit ($6.00), our basis is $16.00. We now own three shares with a total value of $15.60. As an alternative, we could compute the return as follows: $35.91 - $16.00 = $19.91. $19.91 divided by $16.00 yields a negative return of 122.44%.
I am open to suggestions.
When calculating the returns on the NASDAQ Composite, I used the closing index price on the date prior to each of the individual offerings.
Summary statistics – December 11, 2009
Profiles of closed deals – December 11, 2009
Summary information for companies with closed deals – December 11, 2009
Profiles: Companies or assets of acquired – December 11, 2009
Summary information for companies acquired – December 11, 2009
Profiles of open deals – December 11, 2009
Summary information for companies with open deals – December 11, 2009
Summary information for companies without deals – December 11, 2009
Summary information for companies still in registration – December 11, 2009
Profiles of liquidated companies (terminated registrations) – December 11, 2009
Summary information for liquidated companies (terminated registrations) – December 11, 2009
Profiles of liquidated companies that will continue their existence as shells – December 11, 2009
Summary information for liquidated companies that will continue their existence as shells – December 11, 2009
Summary information for companies that have withdrawn their U.S. registration statements – December 11, 2009