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Working off Excess

We're seeing some signs of a more balanced SPAC market. Announced deals still look a little high in terms of valuation.

Like the market the SPAC IPO universe is taking a beating. 

Our monthly SPAC IPO performance review will be out by Monday. We've certainly seen some major drawdowns across the board with very few exceptions.

There's some evidence of the money-raising cycle slowing or coming to an end. A number of SPAC filings from last year have been getting love letters like these from the SEC:

"Your registration statement has been on file for more than nine months and has not yet become effective. You have failed to respond to notice under rule 479 that the registration statement would be declared abandoned unless it was timely amended or withdrawn. In view of the foregoing, it is ORDERED that the registration statement be declared abandoned on March 3, 2022."

We're also starting to see more liquidations that follow naturally from the consistently high levels of redemptions SPAC deals have undergone.

For example, Burgundy Technology Acquisition $BTAQ completed its liquidation this week for $10.05 in the trust account. That's $345M no longer out there shopping around for a crazy deal.

If this activity continues we should get to a better balance in the market and some of the higher quality SPAC names out there may be in a better position to create some shareholder value.

We are still seeing some deals announced at heady valuations. Just today we had Provident Acquisition $PAQC announce target Perfect $PERF which is kind of an "AI and AR meet beauty and fashion." It's an interesting company that we'll be digging into but the headline number of $1B+ in EV for a company planning to do $42M in sales this year and generate $13M in AdjEBITDA seems expensive. We'll see where it trades if they make it to the De-SPAC in Q3.

I would get excited if these deals started to look cheap on the announcement with some clear upside for equity holders. We are not there yet.