SPACs go back, but with no future

Freightos

01/06/2022 18:13

(The authors are Reuters Breakingviews columnists  The opinions
expressed are their own.)
    By Lauren Silva Laughlin and Jennifer Saba
    NEW YORK, June 1 (Reuters Breakingviews) - Every market boom
has a few hangers-on, and the rapidly fizzling craze for mergers
with blank-check firms is no different. Freightos, a cargo
booking firm with little revenue and ambitious projections,
announced a $500 million deal on Tuesday with Gesher I
Acquisition  GIAC.O , a special-purpose acquisition company,
just as the 105-year-old media company Forbes Global Media
scrapped its deal  urn:newsml:reuters.com:*:nL1N2PY1TX. Those who forge on through the
market’s final throes are taking a big risk. 
    A year ago, the Freightos deal would have been unremarkable.
The company’s idea of providing an online platform for booking
and paying for cargo is solid enough. The freight industry is
antiquated and ripe for disruption, and Freightos wants to help
provide visibility and ease. Last year it had revenue of $17
million, though it expects booking on its platform to more than
quintuple by the end of 2023. It already makes a gross profit https://www.sec.gov/Archives/edgar/data/0001853314/000119312522164142/d335912d425.htm.
  
    The trouble is the SPAC market has moved on from the time
when a vision and some revenue was enough. The U.S. Securities
and Exchange Commission has proposed rules that would, among
other things, require warnings on the use of projections. SPACs
relied on those liberally until recently, but the SEC is now
intimating that bankers and others involved with SPACs from an
early stage are now concerned they could be punished if
published forecasts don’t pan out  urn:newsml:reuters.com:*:nL3N2VX89Q. 
    As a result, the SPAC market’s push towards being a
legitimate alternative to initial public offerings is coming
unstuck, with some established names getting cold feet
 urn:newsml:reuters.com:*:nL4N2XO2KE. Forbes calling off its merger with Magnum Opus
Acquisition  OPA.N  is one example. Bill Ackman is coming up on
a deadline that will require him to hand back his pot of cash if
his SPAC, Pershing Square Tontine Holdings  PSTH.N , doesn’t
find a deal. 
    And there is reputational risk. Former Citigroup banker
Michael Klein faced legal challenges over his blank check firm’s
deal with MultiPlan. Big names like Goldman Sachs  GS.N  and
Citigroup  C.N  have been usurped by firms like Stifel Nicolaus
and Nomura  8604.T  in the SPAC league tables, according to data
from SPAC Research, as they hesitate to do deals. Freightos and
its financial advisor Oppenheimer  OPY.N  might be seeing
something that others don’t. Investors, however, have all the
warnings that they need. 
    Follow @thereallsl https://twitter.com/thereallsl and
@jennifersaba https://twitter.com/jennifersaba on Twitter
    
    CONTEXT NEWS
    Digital freight company Freightos on May 31 agreed to merge
with blank-check firm Gesher I Acquisition in deal that would
give the combined company an equity value of $501 million.
    Forbes Global Media said on June 1 it is terminating its
merger with special-purpose acquisition company Magnum Opus
Acquisition.

 (Editing by John Foley and Amanda Gomez)
 ((For previous columns by the author, Reuters customers can
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 | Lauren.SilvaLaughlin@thomsonreuters.com))