The Next Phase of the SPAC Market
What’s next for the SPAC market? Chris Sorrells predicts a period of rationalization, cleaner vehicles, and more experienced sponsors. He also shares why greater skin in the game could drive healthier deals and investor trust.
Guest: Chris Sorrells – Chairman and CEO of Spring Valley
Connect with Chris: https://www.linkedin.com/in/chris-sorrells-5a6a836/
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👉 Michael J. Blankenship - https://www.linkedin.com/in/mikeblankenship/
👉 Joshua Bruce Wilson - https://www.linkedin.com/in/joshuabrucewilson/
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Michael J. Blankenship is a licensed attorney and is a partner at Winston & Strawn LLP. Joshua Wilson is a licensed Florida real estate broker and holds FINRA Series 79 and Series 63 licensure. The content of this podcast is intended for informational and educational purposes only and should not be interpreted as legal, financial, or compliance advice. The views and opinions expressed by the hosts and guests are their own and do not necessarily reflect the official policies or positions of any regulatory agency, law firm, employer, or organization.
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Let’s Connect on LinkedIn:
👉 Michael J. Blankenship - https://www.linkedin.com/in/mikeblankenship/
👉 ...
Mike Blankenship: So there's been a lot of conversation lately about SPAC model evolving or even maturing. They've been around, 30 years. But what do you think the next phase of the SPAC market will look like?
Chris Sorrells: I hope it rationalizes. If you go back pre COVID you had, a hundred or less SPACs, 50 to a hundred in the market we peaked at just north of 700 in April of 22. We know how that ended, that, that's too many deals, too much money. Not enough competent sponsors. Currently we're about 2 56. About a hundred have deals. A hundred fifty, fifty eight or so are looking. There's 26 billion of capital in trust.
72 on file, another 10 billion. Yeah, you're starting to push a point that feels a little too robust in terms of numbers. If all those. Filed get public, you're gonna be north of 200 seeking and 36 billion. If you think about a three or four x multiplier in terms of trust to, deal size, it, you're talking, a hundred, 150 million billion of, deals, probably not that many good deals in the market.
Hoping there's some rationalization. The front end needs to be more discerning, so those investors on the front end need to discern a little, given the instrument and the guaranteed return and the interest that accrues. I think the front end is not overly discerning between sponsors.
One thing that we're certainly seeing, and this is I think a very big positive to the product, more experienced sponsors. With cleaner vehicles are coming into the market and I think the good ones will be able. To not only have a clean vehicle, but they'll be able to provide capital alternatives, IE pipe sources to help fund these deals correctly.
And I would certainly like to see more skin in the game on the front end. For the front end investor. IE if you redeem, maybe you lose some portion of your warrants or you forfeit some interest that's accrued. Just so you're not purely taking an option value and you really don't care who the sponsor is.
The. The good sponsors get the best terms but there's still fairly small delineation between what a good sponsor gets and an established sponsor.