SPAC Bosses Turn to Clubby Deals to Seal IPOs in Chilly Market

Fierce competition amid a market chill is forcing some blank-check companies to pull out all the stops to push deals over the finish line.

Several new special purpose acquisition companies have tweaked their filings right before their market debut to showcase that they’ve already lined up pledges from a select group of investors. With more than 420 SPACs seeking a private company to take public and another 295 with pending initial public offerings, having friendly investors in hand can make it easier to get deals done.

In extreme cases, SPACs have lined up buyers for more than half the IPO. Agritech investor David Friedberg’s TPB Acquisition Corp. I on Thursday amended its offering documents to note that anchor investors want in on roughly $130 million of units at the offering price. The SPAC in early April cut its IPO by $50 million to $200 million.

TPB Acquisition Corp. I is sponsored by San Francisco-based investment firm The Production Board, which focuses on food, life sciences and agritech. Friedberg is a former Google employee and serial entrepreneur who previously started the Monsanto-acquired Climate Corporation.

Former pharmaceutical executive Someit Sidhu’s JATT Acquisition Corp. and ex-Sequoia venture capitalist Li Jianwei’s TradeUp Acquisition Corp. also recently announced they’d lined up anchor investors willing to buy more than half their offerings.

While these commitments aren’t binding, having supporters hype a deal at the gate helps attract others, and effectively reduces the amount of stock the SPACs need to sell during the roadshow. Units earmarked for specific investors are also making up a larger slice of IPOs, partly as a result of declining average offering sizes.

SPAC issuance in dollar terms fell in the second quarter as the average SPAC IPO size dwindled, according to a Barclays research report. Offerings in the second quarter were around $215 million, down 35% from the previous quarter’s average.

Other SPACs have also lined up buyers in advance. Former AOL chief Steve Case’s Revolution Acceleration Acquisition Corp. II added an indication of interest from an affiliate of the SPAC’s sponsor to buy 2.5 million units or 10% of its $250 million offering, according to a filing.

Hong Kong-based private equity firm Gaw Capital’s Gateway Strategic Acquisition Co. said sponsor affiliates indicated interest to buy as much as 4 million units or 20% of the deal, which was cut to $200 million from $300 million, a filing shows.

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