| | | In all of 2014, special-purpose acquisition companies raised a grand total of $1.8 billion in US IPOs, according to the site SPAC Research. This week, Chamath Palihapitiya surpassed that sum in 24 hours: Three different SPACs backed by the Social Capital tycoon priced IPOs on Thursday, combining to raise $2.1 billion.
The listings came just two days after another Social Capital-backed SPAC agreed to merge with insurance startup Clover Health in a $3.7 billion deal. They also came the same week as two other $1 billion-plus SPAC mergers. The same week that two more electric vehicle tech companies eyed SPAC deals. The same week as multiple high-profile SPAC listings from private equity firms. The same week that saw the launch of a new $250 million SPAC that unites the illogical trio of Shaquille O'Neal, former TikTok CEO Kevin Mayer and Martin Luther King III.
Welcome to The Weekend Pitch. I'm Kevin Dowd, and you can reach me at weekend@pitchbook.com. The SPAC spree that began this summer isn't fading away. If anything, it's accelerating. And that's one of nine things you need to know from the past week: | | | | | |  | | Shaq has a SPAC. (Joe Scarnici/Getty Images) | | | 1. Super-popular acquisition companies
Let's start with a rundown of the week's SPAC news. Like I said, there is a lot of it.
The three new blank-check vehicles from Social Capital Hedosophia raised $400 million, $700 million and $1 billion, respectively. Bloomberg reported that the SPACs drew $7 billion in investor demand, a sign of just how eager investors are to get aboard the SPAC train.
The deal with Clover Health will be Social Capital Hedosophia's third reverse merger, following a combination last year with space tourism company Virgin Galactic and a pending $4.8 billion deal with Opendoor. A different space transportation company, called Momentus, agreed this week to go public in a SPAC merger worth $1.2 billion.
Even more so than space, the electric vehicle industry has emerged as a hotbed of SPAC activity (SPAC-tivity?). Romeo Power, which makes batteries for EVs, inked a $1.3 billion SPAC merger this week, while Faraday Future, which makes its own vehicles, indicated it was also on the brink of a SPAC deal. Nikola, Fisker, Canoo, Lordstown Motors, XL Fleet and ChargePoint are all other companies in the space that have either agreed to or completed SPAC mergers this year.
In the world of private equity, two SPACs sponsored by TPG Capital combined to raise $800 million. The Gores Group registered its latest SPAC for an IPO, just weeks after a prior Gores-backed SPAC agreed to merge with United Wholesale Mortgage for $16.1 billion. Late Friday, The Wall Street Journal reported that a SPAC backed by RedBird Capital Partners and famed baseball executive Billy Beane is in talks to merge with the parent company of the Boston Red Sox and Liverpool Football Club in an $8 billion deal.
Former dealmakers at KKR and The Carlyle Group are both sponsoring new SPACs. Vehicles backed by Bain Capital, Apollo Global Management and Cerberus Capital Management have all either filed for or completed public debuts since the start of October.
There have been SPAC novelties. A blank-check company backed by FirstMark Capital raised $360 million for a SPAC that may aim to buy one of the venture firm's portfolio companies, what Dan Primack of Axios described as a "full-stack SPAC." A SPAC from Churchill Capital is in talks to combine with two separate businesses and take them public simultaneously, according to Bloomberg. Easterly Alternatives is reportedly raising capital from LPs for a $100 million fund that will invest exclusively in SPACs.
Go back a couple of weeks and the rundown gets even more colorful. Playboy Enterprises is going public via SPAC. The chairman of Red Robin is backing a SPAC called Tastemaker Acquisition. There's a SPAC called Climate Change Crisis Real Impact I Acquisition. And I already mentioned Shaquille O'Neal and Martin Luther King III, right?
It's been a remarkable run—all the more so considering this year's craze came almost entirely out of the blue. The frequency of SPACs has been on the rise in recent years, but 2020 represents a quantum leap, one that's occurred despite the absence of any major changes to how they function or any other relevant regulations.
It's a strange situation: Were investors underutilizing SPACs in the past, or are they overutilizing them now? It would seem like one or the other must be true.
Sure, there are reasons for this year's boom. Some have cited the pandemic, arguing that the pricing certainty of SPACs makes them more appealing than IPOs in such a volatile market. Sponsors have grown more creative with the terms of SPACs, resulting in more dealmaking flexibility. There's also the fact that blank-check deals have proven extremely profitable: Gores Group head Alec Gores made an $80 million profit off his aforementioned SPAC deal with United Wholesale Mortgage, according to Bloomberg.
But none of those factors tell the whole story. The SPAC boom is also a reminder that financial markets are a free-flowing experiment in mass psychology, where the Keynesian "animal spirits" can have as much of an impact on the movement of billions of dollars as anything so simple as logic or math. There's a real fear of missing out, or what kids these days call FOMO. A psychologist might mention the bandwagon effect, where the behavior of others can become more influential on one's own actions than anything else.
That is not to say the ongoing SPAC boom won't work out for all the investors and companies involved. It is also not to say it will. It is just to say that it is weird.
If all your friends jumped off a cliff, would you do it too? What about if they were all starting SPACs?
2. Grub to go
Instacart raised new funding this week at a $17.7 billion valuation, surpassing DoorDash as the most valuable US food-delivery company with venture backing. GoPuff, which delivers convenience-store staples like snacks and over-the-counter medicines, banked $380 million from VCs at a $3.9 billion valuation. And GrubMarket, which delivers produce both directly to consumers and to other grocery stores and meal-kit companies, collected $60 million this week, with TechCrunch reporting a new valuation of up to $500 million.
3. Software unicorns
VCs crowned four new unicorns this week, all of whom operate in the software space. MessageBird raised $200 million at a $3 billion valuation for its Twilio-esque cloud communication platform. Unqork, the creator of a no-code software platform, reached a $2 billion valuation, while Tipalti, which makes accounts-payable software, was valued at north of $2 billion. That leaves Dialpad, a developer of AI-powered communications tools for businesses, which vaulted to a $1.2 billion-plus valuation with its Series E.
4. Restaurant woes
Ruby Tuesday filed for Chapter 11 bankruptcy protection this week, the latest private equity-backed restaurant chain to cross that particular rubicon during the pandemic. But fear not: The company plans to keep its restaurants open. Or, as the company's CEO put it, "This announcement does not mean 'Goodbye, Ruby Tuesday.'" Meanwhile, California Pizza Kitchen, another ailing chain with PE backing, reportedly called off its bankruptcy auction this week after failing to find a buyer. | |  | | California Pizza Kitchen co-founder Larry Flax, slinging pies during happier times. (Frazer Harrison/Getty Images) | | | 5. Morgan Stanley mega-deals
Wall Street's biggest banks have largely been quiet on the acquisition front during the decade since the end of the global financial crisis. But in recent days, Morgan Stanley made some noise. The investment bank agreed this week to acquire fund manager Eaton Vance in a $7 billion deal, mere days after completing a previously announced takeover of E-Trade for $13 billion. The two moves are evidence of Morgan Stanley's diversification under CEO James Gorman.
6. Ballers
Patrick Mahomes, Anthony Davis, J.J. Watt, Naomi Osaka, Chris Paul and Christian McCaffrey are all some of the biggest names in sports. As of this week, they're also all investors in Hyperice, a muscle recovery startup that raised new funding at a $700 million valuation. Malcolm Jenkins of the New Orleans Saints is also getting in on the act: He launched a new $10 million fund this week called Broad Street Ventures that's funded entirely by Black and other underrepresented investors, including fellow NFL defensive backs Devin McCourty and Jason McCourty.
7. Keeping up with L Catterton
Longtime consumer products investor L Catterton led a $200 million investment this week in Icon Health & Fitness, the parent company of NordicTrack, iFit and other brands, marking the latest major bet on in-home fitness in recent months. The deal values Icon at over $7 billion, according to Bloomberg. L Catterton is also busy preparing for a notable exit: Leslie's, a purveyor of pool supplies, filed for an IPO this week that Renaissance Capital reported could raise some $600 million.
8. Pharmaceutical finds
Bristol-Myers Squibb lined up a deal this week that its CEO described as "potentially revolutionary," agreeing to pay $13 billion for Myokardia, a developer of promising treatments for cardiovascular diseases. In a smaller deal (but one that hits much closer to home for this native Seattleite), Rite Aid agreed to pay $95 million for Bartell Drugs, a family-owned pharmacy chain in western Washington that was founded in 1890.
9. Six-legged meals
Ynsect is an aptly named startup: The French company operates a vertical farm where it breeds insects to be turned into ingredients for animal and plant nutrition. It added $224 million in combined debt and equity to its Series C this week, taking the round's total to $372 million. If not eating anything at all is more your speed than insect consumption, this week had something for you, too: Fastic, the developer of an app for intermittent fasting, raised $5 million in new funding.
View the full list online | | | | | | | | | | A message from Deloitte Private | | | | How family-owned businesses' unique traits can help them thrive | | Dire headlines abound when it comes to small businesses during 2020 to date. Many have closed their doors forever after the sustained blows from the COVID-19 pandemic; others are still struggling to find their footing. Family-owned businesses make up much of this ecosystem, and much like any other enterprise have been under significant pressure to respond to the general health, safety and welfare challenges introduced by the COVID-19 pandemic, not to mention operational disruptions.
However, the same traits that distinguish family-owned businesses from the general market could also help them survive, among which include unique governance, longer-term horizons and overall purpose.
Read more | | | | | | | | |  | | (Malte Mueller/Getty Images) | | | | As one could probably predict in a year marred by the coronavirus, private equity dealmaking and fundraising figures in the US are down in 2020 across nearly every industry. The operative word there, though, is "nearly."
In the tech sector, it's been something close to business as usual. Billion-dollar deals are being struck. Valuations are skyrocketing. And a pair of tech funds that could close with $40 billion in combined commitments may contribute to a red-hot Q4 on the fundraising front.
PitchBook's latest US PE Breakdown is chock full of more details and data on tech's place in the buyout landscape, plus plenty of other analysis on a time of transition for PE. | | | | | |  | | (rudall30/Getty Images) | | | | Venture funding for companies founded by women has been trending up over the past five years, a sign of progress in the long-running bid to increase diversity in a historically homogenous industry. The pandemic, though, is turning into a reminder that the fight for funding equality is very far from over.
Priyamvada Mathur dug into the subject this week, talking to women from around the industry about why funding for female founders is at its lowest point in three years. | | | | | |  | | (Artur Debat/Getty Images) | | | | This summer, PitchBook surveyed hundreds of investors, advisers, bankers, credit experts and other market participants about the current state of sustainable investing. The results were revealing. Environmental and/or social concerns are far and away the biggest driver of sustainable investing initiatives. GPs are much likelier than LPs to have sustainable practices integrated into their whole firm, while LPs are likelier to have a partially integrated program.
What else does the survey reveal? Our analysts published a new report this week taking a detailed look at all of the findings. | | | | | |  | | So close. (drante/Getty Images) | | | | | In May, former Evernote CEO Phil Libin launched an interactive video presentation startup as "a kind of joke." This week, the company raised a very serious $31 million in venture funding, including a $21 million Series A led by Sequoia. The company's name, though, still reflects its comic origins: It is called Mmhmm, which Libin described to Forbes as something "you can say while eating dinner." Now that's a startup that the Crash Test Dummies could get behind. | | | | | | Recommended reads At Footnoted, Michelle Leder built a vital investor resource that became her life's work. Did a hedge fund try to steal her data? [Institutional Investor]
Black users are embracing LinkedIn like never before. Does the site have a problem with that? [The New York Times]
It may be some time before the global aviation industry returns to anything close to normal. A startup called CommonPass thinks it might be able to help. [Fortune]
As the US war in Afghanistan enters its 20th year, more and more sons and daughters of former soldiers are beginning to follow in their parents' footsteps. [Stars and Stripes]
An economist from Brown named Emily Oster won a legion of fans by using the principles of her field to think about parenting. How will her approach fare during the pandemic? [Bloomberg]
A meditation on the meaning of things, and that strange prelapsarian time we call childhood, when confusion is still nothing to fear. [The Paris Review]
A new generation of outdoors lovers is embracing the soulful sport of fly fishing—and the gear that comes with it. [The Wall Street Journal]
How to read the news without going insane. [Vanity Fair] | | | | | | Quote of the week "I joke that people want a lock of his hair."
—Mary Childs, a friend of Bloomberg newsletter whiz Matt Levine, describing Levine's fanatical following to The New York Times | | | | | | The Weekend Pitch is produced by editor Kevin Dowd.
Were you forwarded this newsletter? Sign up at pitchbook.com/subscribe. | | | | | | | | | Since yesterday, the PitchBook Platform added: | | 49 Deals | 201 People | 66 Companies | | | | | | | | | | | | | | |
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