16 Apr 2019

SPAC, the inference from American Technology

Milano Finanza, one of the major Italian newspaper for Finance, uses Kaleyra as a success story to deepen the topic related to SPAC. To learn more about SPAC, read the article below:

“Kaleyra, an Italian group leader in the mobile messaging services for banks, SMEs and enterprises, announced at the end of February that it will be listed on NYSE. Thanks to the business combination with the US SPAC GigCapital, specialized in the Technology, Media and Telecom sector, which was listed in October 2017 after raising $150 million from investors.

Kaleyra is the first Italian company to be the target of a US SPAC, and it is not necessarily the last one. The US market of SPAC is going to become very effervescent and often available to foreign targets.

This trend was clear from the SPAC conference, held in New York at the beginning of February. After the peak activity in 2007 and the collapse in 2009, the SPACOS returned to the limelight in the US in 2014, and since then the number of vehicles that have raised capital from investors have grown exponentially. In 2018, 46 SPACOS were launched in the US, with a collection of 10.1 billion dollars, equal to 18% of the value of all IPOs conducted on the US markets during the year, while 24 business combinations were completed and only two SPACOS went into liquidation. “2017 was a very positive year for the SPAC in the US with 34 SPAC for 10 billion collected”, says Attilio Arietti, founder president and CEO of Oaklins Italy.  Together with the former CEO of Interpump, Giovanni Cavallini was a promoter in Italy of three SPAC, two of which have already brought as many SME (Lu-Ve and Sit Group), while the third, Industrial Stars of Italy 3, is currently in the research phase of the target. Today the SPAC in the USA are almost all sectoral or specialized by geographical areas outside the USA (some in Asia, one in Europe, one in South America).

25% of the SPACers created in 2018 belong to serial promoters, such as David Boris, Marlene Krauss, and James Graff “, explains Arietti, In Italy, the sectoral spacings were very few. Today only one is currently looking for a target, LifeCare Capital, dedicated to the biotech world and promoted by Alessandra Gavirati, Carlo Castellano, Jody Vender, Luigi Sala, and Alessandro Piga. Arietti then pointed out that in the USA the SPACAS promoted by institutional subjects and private equity funds that have brought more important investors with them (in 2017 50% of the SPAC companies had private equity promoters or managers as promoters’ alternative assets and in 2018 represented 40% of the total number of spacings launched). In Italy, some experiments of this type have recently been seen.

Some examples are Alp.I, which has Mediobanca among its sponsors, Vei, which has among its sponsors Palladio Finanziaria Holding, two Eps spacings, promoted by Private Equity Partners and Equita, and finally IdeaMi, supported by Dea Capital and Banca Imi. Always Dea Capital was among the promoters of GreenItaly1. The sizes of the transactions are also growing sharply: In 2018 the average enterprise value of the target company was one billion dollars, with an average investment ticket of 295 million, when in 2012 the average deal was only 59 million.

Many target companies come from private equity funds that find an excellent way to make their disinvestments, selling the companies in the portfolio to the SPACOS. Finally, Arietti underlines, that in the USA “so-called forward purchase agreements (fpa) are also on the increase.” Through these agreements, an institutional investor (cornerstone investor) declares its willingness to invest a considerable sum, often due to the transfer of part of the promoters’ shares. However, it is not a binding commitment; at the time of the business combination, the person who signed the fpa will decide whether he likes the deal or not. The role of cornerstone investor, which adheres to financial instruments reserved for promoters, would respond in Italy to the growing need for institutional investors, Pir funds and management companies, to invest as protagonists in the real economy. It is important to notice that funds are born in the US that invest specifically in SPAC, such as Basso Capital by Howard Fischer. This is a promising move to the Italian industry that ensures exponential growth to the present and the near future.