The Next Phase of the SPAC Market: Fewer Deals, Better Sponsors
Chris Sorrells shares his view on where the SPAC market is headed next.
After years of excess, he explains why rationalization, more experienced sponsors, cleaner vehicles, and better capital alignment are critical for long-term health. He also outlines why greater discipline and sponsor accountability could strengthen the structure moving forward.
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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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Mike B: So there's been a lot of conversation lately about SPAC models evolving or even maturing. Um, they've been around, you know, 30 years. But what do you think the next phase of the SPAC market will look like?
Chris S: I hope it rationalizes. Uh, if you go back, uh, pre COVID you, you, you had, you know, a hundred or less SPACs, you know, 50 to a hundred, uh, you know.
In the market we peaked at just north of 700 in April of 22. Uh, I mean, we, we know how that ended, that, that's too many deals, too much money. Uh, not enough competent sponsors. Uh, currently we're about 2 56. Uh, about a hundred have deals. Uh, you know, a hundred fifty, fifty eight or so are looking. There's 26 billion of capital in trust.
Uh, 72 on file, another 10 billion. Yeah, you're starting to push a point that feels a little, uh, too robust in terms of numbers. Uh, if all those. Filed, um, you know, get public, you're gonna be north of 200 seeking and 36 billion. Uh, if you think about a three or four x multiplier, uh, in terms of trust to, you know, deal size, it, you know, you're, you're talking, you know, a hundred, 150 million billion of, you know, deals, probably not that many good deals in the market.
Um, so, you know, 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. Uh, I think the front end is not overly discerning between sponsors.
Uh, one thing that we're certainly seeing, and this is I think a very big positive to, to the product, more experienced sponsors. With cleaner vehicles are coming into the market. And, uh, I think the good ones will be able to not only, uh, have a clean vehicle, but they'll be able to provide capital alternatives, IE you know, pipe sources to help fund these deals correctly.
And I would certainly like to see more skin in the game on the front end. Uh, for, for the front end investor. I mean, IE if you redeem, maybe you lose some portion of your warrants or you forfeit some, some interest that's accrued. Just, just so you, you're not purely taking. Uh, you know, an option value and you really don't care who the sponsor is.
I mean, the, the good sponsors get the best terms, uh, but there's still fairly, uh, small delineation between what a good sponsor gets and an established sponsor.
Chairman & CEO of Spring Valley II and III
Chris Sorrells is chief executive officer of Spring Valley and chairman of Spring Valley II and III. A veteran investor and operator with over 30 years of experience in the natural resources and decarbonization sectors, he previously led Spring Valley I through its merger with NuScale Power (NYSE: SMR) and served on NuScale’s board. Sorrells was lead director at Renewable Energy Group (Nasdaq: REGI) until its $3.1 billion acquisition by Chevron and earlier was managing director and operating partner at NGP Energy Technology Partners. He holds degrees from the University of Southern California, the College of William & Mary, and Washington and Lee University.