SPAC on top
While special purpose acquisition companies became the latest fad across Wall Street in 2020, the product has been a fashionable core and growing business at Credit Suisse for a long time. The bank is IFR’s inaugural SPAC IPO House of the Year.
While special purpose acquisition companies became the latest fad across Wall Street in 2020, the product has been a fashionable core and growing business at Credit Suisse for a long time. The bank is IFR’s inaugural SPAC IPO House of the Year.
The frenetic pace of funding by special purpose acquisition companies in 2020 broke multiple records throughout the year, with funds raised ultimately on a par with corporate IPOs for the full year. There were many occasions where it felt like SPACs had reached their peak, but one that remains as impressive today as on the night of October 8 came when tech kingpin Chamath Palihapitiya raised a whopping US$2.4bn from three IPOs for his Social Capital Hedosophia SPAC stable.
Credit Suisse was sole bookrunner on all three; the fourth, fifth and sixth SPACs sponsored by Palihapitiya, a one-time Facebook executive turned serial venture capitalist. Social Capital IV and V were upsized by US$50m each to US$400m and US$700m, while VI stuck to its original US$1bn funding target. Subsequent exercise of greenshoe options boosted the financings to US$460m, US$805m and US$1.15bn.
“We took a lot of arrows in the chest when we underwrote Chamath’s first SPAC IPO three years ago,” said Niron Stabinsksy, who joined Credit Suisse in 2015 to oversee SPAC origination. “At the time, SPACs were not focused on tech, venture-backed companies. They tended to be more focused on industrials.”
Social Capital I, which raised US$690m from its 2017 IPO, merged with Richard Branson-backed Virgin Galactic in July 2019, a US$1.3bn transaction that landed Credit Suisse roles on both legs of the trip, as sole bookrunner on the IPO and M&A adviser to Social Capital. The space tourism company is now valued at US$5.6bn.
There have been bigger front-end financings than the US$1bn raised by Social Capital VI, but size can be an impediment to consummating an acquisition, points out Stefanie Gallagher, who syndicates SPAC IPOs at Credit Suisse.
Palihapitiya had only completed IPOs for his second and third SPACs a few days apart six months earlier, yet both had announced acquisitions by October, ensuring the trio of new funds received a warm response in a brief period when SPAC IPOs were struggling.
Credit Suisse has been ever present.
The bank ran 62 SPAC IPOs that raised US$16.4bn, commanding a market share of 14.7% of the US$78.1bn raised by US-listed SPACs in 2020, according to Refinitiv data.
For perspective, the US$78.1bn funding total compares to US$13.1bn in 2019, the prior highwater mark, and to US$83.2bn raised through corporate US IPOs.
Critics deride Credit Suisse for a lack of innovation, pointing to a cookie-cutter approach to IPO financings, but that is arguably to the bank’s credit seeing as SPACs live and die on the reputation of their backers and structural nuances only aid M&A on the margin.
Credit Suisse also attracted an impressive roster of luminaries to SPACs.
In May, real estate mogul and Starwood Capital CEO Barry Sternlicht landed US$690m for his SPAC debut – Jaws Acquisition – more than double the US$300m sum targeted on the original IPO filing and including the greenshoe option. Jaws chomped on Cano Health in November with a merger agreement that valued the healthcare facility operator at US$3.9bn.
May also saw serial SPAC entrepreneur Bill Foley secure US$1.035bn through Foley Trasimene Acquisition and return for US$1.46bn with Trasimene II in October, both of which were jointly led by Credit Suisse and Bank of America. Trasimene I and II in December agreed to merge with Alight Solutions, a business process outsourcer, and online gaming-focused fintech Paysafe, respectively, in both cases supported by forward purchase agreements by the Foley-chaired investment conglomerate Cannae Holdings.
Other standout execs in the Swiss bank’s roster were Charles Drucker and Boon Sim, who raised US$725m in July through Artius Acquisition; Chinh Chu, of Blackstone fame, and his US$920m CC Neuberger Principal Holdings I, a SPAC jointly sponsored by Neuberger Berman; and Todd Boehly, the CEO of investment conglomerate Eldridge Industries, an early-stage backer of DraftKings and partial owner of the LA Dodgers, through the US$544m Horizon Acquisition.
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