How big can a SPAC get?
The answer, in short, is as big as a financier can dream. This week, a blank-check firm that raised $500 million in its I.P.O. got $4 billion in additional funding from private investors to merge with Grab in a deal worth $40 billion. That’s a difference of nearly 8,000 percent between the cash in the SPAC and the value of the company that will take over its listing. It’s the largest ratio on record, according to data from SPAC Research.
The size of a SPAC is only loosely related to that of the target it seeks. Additional funding these companies arrange alongside a merger allows them to take on bigger targets, and the bigger the target, the less dilutive the SPAC sponsor’s stake in the combined entity, making it more attractive to other shareholders. So far this year, the value of announced SPAC mergers has been more than 800 percent larger, on average, than the cash in the SPACs; that’s up from roughly 600 percent last year and 400 percent in 2019.
More than 400 SPACs now seeking acquisitions are together sitting on $140 billion, so applying the current ratio implies a potential deal value of $1.3 trillion, roughly the value of all M.&A. deals in the U.S. last year. (Using Grab’s outsize ratio, it would be a whopping $11 trillion.)
The new media barbell
Jon Kelly, a former Vanity Fair editor, plans to launch a new media company with an unusual business model, Ed Lee and DealBook’s Lauren Hirsch report for The Times. The venture has raised about $7 million from investors, including the private equity firm TPG. Notably, it will pay its yet-to-be-named writers a portion of the subscription fees they personally generate, creating a compromise between the dominant business models of old and new media companies.
Upstart media brands are betting on star power to drive subscriptions. Mr. Kelly’s new venture, which may be called Puck, the name of an American humor magazine of the late 1800s and early 1900s, plans to use its revenue-sharing model to attract big-name writers. The push to “monetize individuality” has attracted increasingly high-profile figures to new platforms: Substack offers lucrative contracts to select writers who use it to launch newsletters.
Established companies rely more on prestige, breadth and experience. The largest media companies lean on their brands to attract both talent and subscribers.
It gets murky in the middle. Digital media players like BuzzFeed, Vice, Vox Media and Group Nine rely more on ads than subscriptions, and they’ve stumbled as the pandemic has ravaged that industry. In an increasingly crowded, differentiated field, they’re trying to bulk up via mergers or go public to raise funds and satisfy early investors.