WEBVTT
00:00:00.080 --> 00:00:02.000
Mike Blankenship with the SPAC Podcast Day.
00:00:02.160 --> 00:00:05.599
I'm joined by Christine McNurney from Periscope Capital.
00:00:05.759 --> 00:00:08.800
Christine, why don't you give us a few minutes about yourself and Periscope?
00:00:09.279 --> 00:00:09.599
Sure.
00:00:09.759 --> 00:00:14.320
So Periscope Capital is a Toronto-based alternative asset manager.
00:00:14.560 --> 00:00:16.399
We have a Multistrat fund.
00:00:16.480 --> 00:00:20.879
And one of the key focuses that we have in the Multi-Strat fund is SPACs.
00:00:21.039 --> 00:00:24.559
And we participate in SPACs through all stages of the life cycle.
00:00:24.719 --> 00:00:35.600
So, you know, testing the waters very early stages, IPOs, secondary market trading, warrant trading, and then all the way to selective DSPAC financing.
00:00:36.320 --> 00:00:40.399
Myself, I focus more on the beginning stages of the SPAC lifecycle.
00:00:40.479 --> 00:00:42.640
So I do a lot of the testing the waters.
00:00:42.960 --> 00:00:46.880
A lot of the IPO decisions go through me.
00:00:47.200 --> 00:00:54.320
And I would say that there's very few sponsor teams out there in the SPAC world that I have not spoken to.
00:00:54.560 --> 00:00:59.119
So yeah, a lot of the IPO stuff, I'm the expert.
00:00:59.840 --> 00:01:01.600
Yeah, that's terrific in a lot of viewpoints.
00:01:02.000 --> 00:01:08.319
So let me ask, so you know, how can a management team stick out in the testing the waters meeting?
00:01:08.959 --> 00:01:22.799
So I don't know if people realize that when they come to a testing the waters meeting as a sponsor team, they are showing me and other investors basically carbon copies of the same presentation.
00:01:23.040 --> 00:01:31.359
So it's going to have their terms, it's going to have their bios, it's going to have what they're looking for, it's going to have a page that has the logos of all the companies that they've been affiliated with.
00:01:31.519 --> 00:01:37.840
So what really makes you stand out is having more than just the generic talking points.
00:01:38.079 --> 00:01:44.719
You know, if you say to me, I'm going to find a company that's ready for the public markets, like tell me what that means.
00:01:44.799 --> 00:01:48.719
And it's surprising sometimes that people can't answer that.
00:01:48.959 --> 00:01:56.640
They don't really have a good way to articulate how they're going to view a company and decide if it's ready for the public markets.
00:01:56.799 --> 00:02:02.239
You know, if they say they want a capable management team, what is a capable management team?
00:02:02.480 --> 00:02:06.640
And again, you know, people might just say, like, it's just a hunch I have.
00:02:06.799 --> 00:02:15.360
And then I have to decide how much do I value your hunch as just, you know, some person that I'm meeting for the first time.
00:02:15.599 --> 00:02:22.000
Obviously, if you are a multi-time repeat spec sponsor, you have more credibility behind your hunches.
00:02:22.159 --> 00:02:29.039
You know, people that have very lengthy histories and deal making, their hunches are probably valued a little bit more.
00:02:29.120 --> 00:02:34.719
But still, if you can articulate what you're specifically going out there to find, that makes a big difference.
00:02:34.800 --> 00:02:37.039
And not a lot of teams do that.
00:02:38.400 --> 00:02:38.719
Yeah.
00:02:38.879 --> 00:02:46.400
And then speaking of teams, like who should actually launch a SPAC and what does that ideal sponsor look like from your point of view?
00:02:46.719 --> 00:02:48.319
I mean, it's not a celebrity.
00:02:48.479 --> 00:02:53.199
I don't want to see the 2020, 2021 celebrity SPACs ever again.
00:02:53.439 --> 00:03:02.800
I think that in that time period, we had a lot of people looking at the market and saying, well, like everybody's got a SPAC, so I can do it too.
00:03:02.960 --> 00:03:07.759
And obviously, we know that that didn't pan out very well for the vast majority of teams.
00:03:08.000 --> 00:03:10.639
So, you know, not everybody should have a SPAC.
00:03:10.960 --> 00:03:16.639
I like a sponsor team that has a mix of both operators and deal makers.
00:03:16.879 --> 00:03:23.599
I think that they tend to find the best targets and are able to take them public and do something with that company.
00:03:23.919 --> 00:03:39.360
People that have, you know, a more niche Rolodex, like obviously everybody that's doing a SPAC says, like, you know, I can pick up the phone and get 20 companies on the line right now, but so can everybody else.
00:03:39.520 --> 00:03:46.240
So, like, is your experience level in tune and in line with what specifically you're going out there to find?
00:03:46.400 --> 00:03:48.159
And not everybody has that.
00:03:48.560 --> 00:03:55.840
So, you know, I like to see a large depth and breadth of experience in the markets and in operations.
00:03:56.240 --> 00:04:06.479
And, you know, obviously, again, if you are a repeat sponsor team, if you've done a deal before, if you know what it's going to take to get the SPAC to the finish line, that has a lot of weight.
00:04:07.360 --> 00:04:10.639
Yeah, and then let me ask you on geographic scope.
00:04:10.719 --> 00:04:20.000
So it's you know, you get a lot of SPAC sponsors that may be non-US or US, and and I don't mean just Canada, Canadian, but like Asia or Europe.
00:04:20.240 --> 00:04:23.680
And, you know, does that make a difference to you?
00:04:23.759 --> 00:04:30.800
Because they're looking at certain potential targets in areas that may be more risky to be public in the US, or or how do you view that?
00:04:31.360 --> 00:04:33.360
Yeah, I I think it does make a difference.
00:04:33.600 --> 00:04:46.079
I think we've seen a lot of, you know, just historically speaking, spacks that, for example, have found uh targets in Asia, they haven't tended to have performed as well as some of the US targets.
00:04:46.319 --> 00:04:58.720
Sometimes they're looking for things that seem so geographically difficult, uh, you know, like defense in areas that are probably not going to be as received as well in the US.
00:04:58.959 --> 00:05:00.399
You know, it can be tricky.
00:05:00.480 --> 00:05:15.120
I think you're walking a fine line, and it can be tough because it's also hard to verify the experience levels and the roll index of people that are in, you know, more geographically niche locations.
00:05:15.759 --> 00:05:36.800
Um, you know, you could be with a really large company in Vietnam, and it's going to be a little bit less applicable when you start calling companies in other areas that people might not be as familiar with it as they would with, you know, the big brand names that the US FACs are kind of dealing with in their, you know, their backgrounds and their bios.
00:05:36.879 --> 00:05:37.839
So it can be difficult.
00:05:37.920 --> 00:05:39.519
It's certainly not impossible.
00:05:39.759 --> 00:05:44.720
Certain regions are much more friendly and beneficial than others.
00:05:44.800 --> 00:05:50.560
You know, we've seen a lot of really interesting things coming out of Europe lately with the quantums.
00:05:50.879 --> 00:05:53.360
So, you know, like it's not all equal.
00:05:53.600 --> 00:06:04.959
And certainly you can find something interesting in a different geography, but it's how well are you going to be able to say the story to the US audience?
00:06:05.360 --> 00:06:07.839
It can't always translate perfectly.
00:06:08.000 --> 00:06:10.480
So, you know, it can be tricky.
00:06:11.360 --> 00:06:12.720
Yeah, that makes sense.
00:06:12.879 --> 00:06:20.639
So when you are evaluating a DSPAC, you know, opportunity, what do you focus on first when you're looking at them?
00:06:21.839 --> 00:06:27.199
So I mean, obviously you want to look at the industry that they're operating in.
00:06:27.360 --> 00:06:28.240
How big is it?
00:06:28.399 --> 00:06:35.360
We've seen some really interesting companies that are in such niche industries where they're just not going to have a comp set.
00:06:35.600 --> 00:06:39.040
And that's going to make it really difficult for them to get equity coverage.
00:06:39.279 --> 00:06:58.399
So sometimes I'm talking to these DSFAC companies, I'm like, your company is legitimately cool, but I just don't think it's going to be received well by the equity markets because they're just, it's going to be too much work for everybody to learn about your tiny small cap company that has no peer set.
00:06:58.720 --> 00:07:02.800
So it tends to, those tend to get, you know, orphaned a little bit.
00:07:02.959 --> 00:07:04.480
You're not going to have equity coverage.
00:07:04.560 --> 00:07:06.240
You're not going to be invited to the conferences.
00:07:06.319 --> 00:07:07.759
You're not going to be able to get out there.
00:07:07.839 --> 00:07:10.240
So, you know, do they have a good peer set?
00:07:10.399 --> 00:07:14.560
Do they have, you know, equity analysts that are going to be interested in covering them?
00:07:14.800 --> 00:07:17.120
Are they in a topical area?
00:07:17.279 --> 00:07:25.439
You know, for SPACs, I think the best de SPACs are ones that are capitalizing on an interesting trend.
00:07:25.600 --> 00:07:28.079
So, you know, are they getting in on that?
00:07:28.240 --> 00:07:35.839
I think that's really where SPACs shine is, you know, you can get out into, you know, quantum is a great example.
00:07:35.920 --> 00:07:40.319
It's something that's very topical right now, and you're able to go public much more quickly with a SPAC.
00:07:40.639 --> 00:07:45.680
So, you know, you're able to get out there as something that's going to capture the market's attention.
00:07:45.920 --> 00:07:58.160
Something else I always really pay attention to is how well is the management team, and this is the management team of the DSFAC company, the target company, how well are they able to tell their story?
00:07:58.480 --> 00:08:05.120
Because, you know, first of all, they've got to sell their story to me, but then they've got to go out and sell their story to the world.
00:08:05.279 --> 00:08:12.000
And you can see people struggling with that sometimes and things that are a little bit trickier, like maybe biotech.
00:08:12.319 --> 00:08:17.839
Uh, you know, I'm always very upfront with these teams saying, I'm not a biotech analyst, I'm a generalist.
00:08:17.920 --> 00:08:22.240
So you're gonna have to, you know, translate it for me.
00:08:22.399 --> 00:08:24.720
You're gonna have to say it in a way that I'll be able to understand.
00:08:24.800 --> 00:08:27.040
And sometimes that really does not happen.
00:08:27.199 --> 00:08:40.799
And I just know they're gonna go out there and the market's gonna have a harder time understanding it than something that's a little bit, you know, easier to explain, or they have hired somebody that's going to be able to explain it very well.
00:08:40.960 --> 00:08:52.799
Um, I've seen that a lot again in the quantum companies where they tend to have somebody that's able to be the bridge between what's happening at the company and what the investors need to hear.
00:08:52.960 --> 00:08:56.000
I don't need to hear all of the nitty-gritty details.
00:08:56.159 --> 00:09:03.759
I need the big picture, I need where you fit in in the overall picture of the industry, and I need the financials.
00:09:03.919 --> 00:09:09.600
And if you're able to explain that in an interesting, captivating way, I think that'll go very far.
00:09:10.159 --> 00:09:15.360
So, you know, you end up looking at a lot of things, like valuation is of course very important.
00:09:16.080 --> 00:09:32.000
Uh, you can sometimes find founder-led companies that maybe are a little bit less receptive to what the market is going to think their valuation should be, as opposed to maybe what they personally should think they're think their valuation should be.
00:09:32.080 --> 00:09:33.519
So that can be tricky.
00:09:33.759 --> 00:09:36.639
But you know, there's a lot of things that go into the D SPACs.
00:09:36.799 --> 00:09:43.200
And you know, at Periscope, we don't participate in many D SPAC financings.
00:09:43.279 --> 00:09:45.840
You know, we've done selective pipe financing.
00:09:46.159 --> 00:09:53.600
We tend to be very selective in what we participate in, but we always try to be a good sounding board for the D SFACs.
00:09:53.759 --> 00:10:02.399
So, you know, come tell your story to me, we'll give you feedback, we'll help you with you know valuation and tell you if it makes sense or if it doesn't make sense.
00:10:02.559 --> 00:10:05.679
How can you, you know, better relay your story?
00:10:05.840 --> 00:10:11.919
So even though we aren't necessarily participating in all of the D SFACs, we certainly see them all.
00:10:12.159 --> 00:10:15.519
So it's you know, it's an interesting space to be in right now.
00:10:15.600 --> 00:10:23.679
We're seeing a lot of different uh industries coming into play, and some of them are certainly being more well received than others.
00:10:24.159 --> 00:10:27.360
Uh well, going down that a little bit further.
00:10:27.440 --> 00:10:31.120
So, where do you see you know SPACs make the most sense today?
00:10:31.279 --> 00:10:35.600
Are there you know particular types of companies and sectors mentioned quantum uh computing?
00:10:35.759 --> 00:10:40.480
But the like, you know, what are where are you what's your view if you were to look it up?
00:10:40.639 --> 00:10:43.919
I'm not not making a commit here, but like what's what are you thinking?
00:10:44.480 --> 00:10:46.799
Yeah, I'm not we're not going down that.
00:10:47.039 --> 00:11:06.000
Uh certainly things that are highly topical, and you know, as I mentioned, it's a much shorter timeline from you know the D SPAC to actually being the public company than it is if you did a more traditional IPO, which means that you can capitalize on these market trends and market focuses.
00:11:06.240 --> 00:11:07.919
So that can be very interesting.
00:11:08.080 --> 00:11:18.399
You know, we're seeing a lot of companies right now that are focused more on defense, and that is obviously highly topical, and they'll be able to go out and find something and bring it to market more quickly.
00:11:18.639 --> 00:11:21.120
Uh, things that are high growth.
00:11:21.360 --> 00:11:31.120
Uh you know, obviously with the FCC rules, you're not allowed to give the projections the way that you used to be able to, but you're still able to get much more feedback.
00:11:31.279 --> 00:11:38.879
You know, when I I've worked both equity capital markets with traditional IPOs and SPAC IPOs, and it's a very different process.
00:11:39.039 --> 00:11:42.320
You know, with an ECM IPO, they're coming to you.
00:11:42.559 --> 00:11:49.759
Maybe you can give like a little bit of feedback on where in the range you think it'll fall, but the pricing isn't decided until right before.
00:11:49.919 --> 00:12:10.720
Whereas with a SPAC, like we will be engaging with the company for weeks and weeks while we go back and forth and discuss valuation to discuss metrics, which means that they're gonna have both a better understanding of how the market, the SPAC market, will receive their IPO, as well as more certainty in the valuation, which is very beneficial for these companies.
00:12:10.879 --> 00:12:20.240
So I think the high growth, highly topical, you know, kind of niche but not super niche sectors can be very interesting for DSPACs.
00:12:21.039 --> 00:12:24.320
Yeah, and and let's go back in history just you know, five years ago.
00:12:24.399 --> 00:12:28.480
I mean, it seems like it was just yesterday, but like 2020 and 2021.
00:12:28.639 --> 00:12:28.799
Yeah.
00:12:29.120 --> 00:12:32.240
What have you, you know, what have you seen fundamentally change in the SPAC market?
00:12:33.120 --> 00:12:37.519
So, I mean, 2020, 2021 was an exciting time to be in SPACs.
00:12:37.679 --> 00:12:39.919
And certainly everybody was in SPACs.
00:12:40.159 --> 00:12:41.360
It was it was nice.
00:12:41.440 --> 00:12:45.919
It was no longer, you know, where you tell people you work in SPACs and people say, what on earth is that?
00:12:46.159 --> 00:12:50.320
At least people knew what it was, but uh there were far too many SPACs at that time.
00:12:50.399 --> 00:12:55.440
You know, we had over 600 seeking SPACs, and that's just not the market can't handle that.
00:12:55.600 --> 00:12:58.320
There's not that many companies that need to de-SPAC.
00:12:58.559 --> 00:13:00.559
So we had a disconnect there.
00:13:00.799 --> 00:13:06.799
So we're seeing a lot more, I'd say, measured control in the market right now.
00:13:07.039 --> 00:13:13.440
You know, we certainly had uh a high level of IPOs in January and February.
00:13:13.600 --> 00:13:24.480
And while that started to get a little concerning, we started to see, you know, whispers of 2020 and 2021, the market has done a good job of correcting itself and pairing back on these IPOs.
00:13:24.559 --> 00:13:28.480
So I don't think we're gonna get to that crazy level that we were at before.
00:13:28.639 --> 00:13:32.320
But we're also seeing a high level of repeat sponsors.
00:13:32.559 --> 00:13:40.559
So, you know, I haven't looked at the number in the past month or so, but at the end of last year, we were at almost 70% of SPAC IPOs.
00:13:40.720 --> 00:14:05.600
We're with repeat sponsors, and I have a lot of a lot more faith in those repeat sponsors, even if their previous SPACs liquidated or, you know, found a company in the public that isn't trading as well, they have a much better understanding of what it will take to get something to the public markets and hopefully have learned from the things that happened before and they'll be able to perform a little bit better this time around.
00:14:05.679 --> 00:14:10.399
So we're seeing a lot more repeat sponsors that just have a much better understanding.
00:14:10.639 --> 00:14:23.919
And obviously, we are seeing strong repeat sponsors as well that have had very successful DSFACs under their belt and they're coming back to the market, which I think also gives a lot of confidence to the investors in the market.
00:14:24.000 --> 00:14:33.120
You know, we're seeing that people that believe strongly in the product and don't believe that it was just a you know a funny COVID fad are still coming back.
00:14:33.279 --> 00:14:37.200
They're still seeing value in bringing companies public through this method.
00:14:37.440 --> 00:14:44.639
So I have a lot more faith in where we are now, where we are today versus where we were in 2020 and 2021.
00:14:44.879 --> 00:14:53.519
You know, I ask me again if we see a you know Beyoncé sponsored SPAC, I might start getting a little bit worried again, but we're not there yet.
00:14:53.679 --> 00:14:56.799
So overall, I think we're in a good position.
00:14:56.960 --> 00:15:02.879
I really I'm confident with the sponsor teams, uh the vast majority of the sponsor teams that I'm talking to.
00:15:02.960 --> 00:15:07.279
They have a very strong and solid understanding of the market as a whole.
00:15:07.840 --> 00:15:09.279
Yeah, I mean, I I I agree.
00:15:09.360 --> 00:15:15.200
I think there's a lot more, you know, visibility and they continue to see that and they learn from those mistakes.
00:15:15.360 --> 00:15:22.879
But on the on for the targets, like what would you give at what would be your advice on the DSPAC that may struggle at closing?
00:15:23.039 --> 00:15:32.960
Because maybe they took a too high evaluation, you know, they need to be careful coming out or or something happened, not necessarily a macroeconomic issue, but them, you know, on their own business.
00:15:33.120 --> 00:15:34.639
What what advice would you give them?
00:15:34.960 --> 00:15:41.360
I mean, I think that it's very important for the D SPAC companies and the sponsor teams to have a long-term view.
00:15:41.519 --> 00:15:44.559
And this that's the case with a traditional IPO as well.
00:15:44.639 --> 00:15:54.559
Like you're probably going to see some volatility in your stock price in the near term, you know, while the market kind of decides on what the appropriate valuation really is.
00:15:55.039 --> 00:16:02.639
Uh so I mean, if you're thinking about it as a one-month, a three-month, a six-month hold, it's it's gonna be a tough time.
00:16:02.879 --> 00:16:06.000
Hopefully, you're having a longer-term viewpoint.
00:16:06.159 --> 00:16:15.039
And SPACs really shine when the sponsor team has a set of skills and experience that's gonna complement the D SPAC team.
00:16:15.279 --> 00:16:18.879
So, you know, again, that's the ideal situation for the SPAC.
00:16:19.039 --> 00:16:30.399
They'll be able to work together and increase the value and increase the, you know, the operations of this D SPAC company, which will hopefully help grow the share price in the in the medium-term future.
00:16:30.639 --> 00:16:32.879
You know, it's it can be tough.
00:16:33.039 --> 00:16:37.360
Like we've certainly seen a lot of D SPACs trading at, you know,$2.
00:16:38.159 --> 00:16:42.320
And it's not always reflective of a failing company.
00:16:42.639 --> 00:16:54.240
It could just be they came out a little bit too aggressive with your valuation, and you're gonna have to kind of pay the price for a little while, and hopefully we'll we'll get you back up there.
00:16:55.039 --> 00:16:55.679
Yeah.
00:16:56.480 --> 00:17:05.599
Well, putting your sort of your hat on the future here, um, Crystal Ball, uh, where do you see the rest of this year as far as spec?
00:17:06.000 --> 00:17:07.599
We've seen a lot of new issuance already.
00:17:07.680 --> 00:17:11.440
And so where do you see that um kind of at the end of the year?
00:17:11.920 --> 00:17:26.720
So, you know, as I mentioned, I'm speaking to a lot of sponsor teams, I'm speaking to a lot of banks, and I do think that we are mostly in agreement that we need to have a more measured approach to the spec issuance market.
00:17:26.960 --> 00:17:33.680
We had a very aggressive 20 or early January and February, so early 2026.
00:17:33.759 --> 00:17:37.279
It was and end of 2025 with a lot of issuance.
00:17:37.519 --> 00:17:42.079
Uh, but we're seeing teams saying, you know what, I'm okay to take a step back.
00:17:42.240 --> 00:17:48.000
I don't need three or four seeking SPACs at a time, the way that people felt that they needed earlier.
00:17:48.160 --> 00:17:50.880
You know, they're a little bit more measured in.
00:17:51.119 --> 00:17:55.039
I'm gonna find a target and then I'll move on to the next one.
00:17:55.279 --> 00:18:03.200
Um some franchise SPACs aside, but you know, most of the smaller teams are kind of doing one at a time.
00:18:03.440 --> 00:18:07.839
It's a more appropriate way to do a SPAC, I think.
00:18:08.319 --> 00:18:25.359
Uh we're seeing teams being a little bit more willing to adjust size, adjust terms, or weight, which all of that I think is indicative of a market that is not willing to let 2021 happen again.
00:18:25.599 --> 00:18:30.720
We do not want to have, you know, 400 orphan SFACs floating around.
00:18:30.960 --> 00:18:48.400
Um, I think that we will start seeing that we've hit in a problem when we, you know, we start seeing the SPACs that do funny things like, you know, a six-month term plus three, plus four, plus one, plus plus, you know, those like funny extension packages that they had for a while, things like that.
00:18:48.480 --> 00:18:55.839
It's a it's a way of kind of artificially inflating the yield, and it's it's not, it doesn't work out.
00:18:56.000 --> 00:19:05.200
So I think that we're seeing both the banks and the sponsor teams and the investors not willing to accept what we had happen before.
00:19:05.279 --> 00:19:13.599
And hopefully the more measured approach will make it so that we have a more long-term sustainable market in the SPAC world.
00:19:14.319 --> 00:19:15.759
Yeah, I completely agree.
00:19:15.920 --> 00:19:16.880
There was a lot going on.
00:19:16.960 --> 00:19:18.240
We still have a lot seen.
00:19:18.400 --> 00:19:19.920
So it'll be an interesting year.
00:19:20.000 --> 00:19:22.319
Hopefully, we'll see a lot more D SPACs closed as well.
00:19:22.559 --> 00:19:23.680
We need to see the D SPACs.
00:19:23.759 --> 00:19:25.200
I'm telling that to every team.
00:19:25.359 --> 00:19:30.400
Don't issue until we start seeing more D-SPACs being announced.
00:19:30.559 --> 00:19:37.759
Um, because right now we have, I think, 225, 220-ish seeking SPACs.
00:19:38.079 --> 00:19:44.160
And then we have, you know, about a hundred that have uh targets that haven't closed yet.
00:19:44.240 --> 00:19:48.400
So, you know, some of those will get canceled, so they'll be back in the seeking space.
00:19:48.480 --> 00:19:50.960
And then we have a bunch that have uh filed S1.
00:19:51.200 --> 00:19:58.079
So I mean, if all of those came out, I think we're in a bit of a precarious position, and I don't think we want to be there.
00:19:58.319 --> 00:20:08.880
So certainly if we have an inflow of really positive DSPAC transaction announcements, then I think that makes some more room for new spacks to come in.
00:20:08.960 --> 00:20:16.960
But until we start seeing that churn, I think we need a little bit of a more measured approach in the IPO issuance.
00:20:17.519 --> 00:20:18.160
I agree.
00:20:18.319 --> 00:20:19.759
Well, Christine, it's been a pleasure.
00:20:19.839 --> 00:20:22.400
I really appreciate you uh coming on the podcast today.
00:20:22.640 --> 00:20:23.119
Absolutely.
00:20:23.279 --> 00:20:24.880
Thank you so much for having me.
00:20:25.119 --> 00:20:25.440
All right.
00:20:25.519 --> 00:20:27.680
Well, this is Mike with the SPAC podcast.
