Another Day, Another SPAC IPO… $200 Million for VectoIQ

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Another Day, Another SPAC IPO… $200 Million for VectoIQ

May 16, 2018 INTEL by Kristi Marvin

VectoIQ Acquisition Corp. Prices Their $200 Million IPO…With a Few Tweaks to the Terms

On Tuesday evening, VectoIQ announced the pricing of its Nasdaq-listed SPAC, raising $200 million in its initial public offering.  The SPAC intends to focus on the industrial technology, transportation and smart mobility industries, and will be led by Stephen Girsky.  Mr. Girsky was instrumental in leading General Motors out of bankruptcy while serving as GM’s Vice Chairman from 2010 to 2014.

Similar to Trinity Merger Corp., VectoIQ’s IPO terms changed slightly from the initial filing, but as you’ll see below, there is a good reason.

To start, VectoIQ’s unit is now comprised of one share of common stock and one full warrant.  Additionally, the trust is over-funded at 101%, or $10.10 per share.  The initial filing stated one share and three-fourths of one warrant and a trust value of 100%, or $10.00 per share.

However, it should be noted that Cowen is one of the Sponsors of VectoIQ and purchased 1,449,000 Founder Shares and has also committed to purchase 200,000 Private Units at $10.00 (220,000 if the over-allotment is exercised). In my experience, banks do not like to part with their money so take this a sign of confidence.

On top of that, VectoIQ has a backstop. A fund affiliated with P. Schoenfeld Asset Management LP, has committed to a forward purchase agreement of up to $25 million. Albeit, the fund has a “right to be excused” from purchasing, but then they lose their Founder Shares.

And then the cherry on top of the backstop is the “Anchor Investor” – BlackRock Funds.  Blackrock Funds, which is also one of the Sponsors and owns 468,277 Founder Shares, AND also committed to purchasing 50,000 Private Units, expressed an interest in purchasing an additional $25 million of units in the IPO (the Anchor Investment).  This means that (per the S-1)…

“In the event that such anchor investor purchases such units (either in this offering or after) and votes them in favor of our initial business combination, it is possible that no votes from other public stockholders would be required to approve our initial business combination, depending on the number of shares that are present at the meeting to approve such transaction.”

In a nutshell, I’m not surprised the underwriters had to sweeten the deal by going to 101% and offering a full warrant. Not because this is a bad deal (it looks good), but because the institutions that participate in SPACs now have no leverage for negotiating the conversion of their shares for the pro rata amount in trust, i.e., VectoIQ basically already has the vote.  So…in order to get the institutions into the IPO, they needed to add a little extra juice and it looks like $10.10 per share and a full warrant did the trick.

This brings the total-to-date 2018 SPAC IPO deal count to 14 with total gross proceeds of $3,053.5 billion. At this pace, 2018 should at least equal 2017’s numbers and will most likely exceed them.

Congratulations to VectoIQ and well done to the underwriters – Cowen and Chardan.

VectoIQ’s unit will begin trading on Wednesday, March 16th, under the symbol VTIQU.