Monday Evening Update: CIC, IPOA, SBE.U


Monday Evening Update: CIC, IPOA, SBE.U

Jul 22, 2019 INTEL by Kristi Marvin

Monday evenings are typically heavy on filings, so in the interest of time, a short summary of the most important news has been provided below.


Capitol Investment Corp IV, which recently closed their transaction with Nesco, filed some additional documentation this morning.  In addition to a new bond offering, they also (finally) released their redemption figures. Albeit, it was buried in their Pro Forma Update, among a litany of other filings.  However, what was disclosed was that 26,091,034 of Capitol’s ordinary shares opted to redeem at a redemption price of approximately $10.19 per share. That means, approximately $149 million was left in trust post vote.

However, what was eye catching about all of Capitol’s releases this morning was that Nesco also agreed to waive the condition of cash available at closing of the Business Combination of $265 million.  Instead, they agreed to accept $200 million.  Why is this surprising?  Well, because this change happened AFTER the shareholder vote.  The presumption of a shareholder vote is that you are voting to approve the FINAL terms of a deal.  However, if the deal terms change after the deal has been approved, what’s the point of a vote? Granted, Capitol’s term change of cash at closing is not super meaningful. Not really.  However, this is a bad precedent.  If a SPAC can change the cash available term, what else can they change post closing?  Most likely, this term change came about because of some waiver in the proxy that allowed the change in conditions, but….this should be tightened up going forward. SPAC structures are FUNDAMENTALLY about giving shareholders the power of a vote.  If combinations start changing terms POST-VOTE, is the proxy just a straw man vote?


Social Capital Hedosophia Acquisition Corp. (IPOA) filed their first preliminary proxy this evening and it’s for an extension vote, as expected.  For reference, IPOA runs out of time in a little less than two months (September 18th), so this was not unanticipated.  Additionally, IPOA is asking to extend three months to December 18th, but are not expected to contribute any additional capital for shareholders who choose not to redeem.  Why?  Because this transaction is already trading significantly above trust value. It’s not necessary. If you do not want to own the share, you can just sell it at a price significantly above estimated redemption value.  We’ll keep an eye on the proxies though and if anything changes, we’ll update.


Switchback Energy (SBE.U), refiled their S-1 this evening with a number of new underwriters added to the cover.  For one, Credit Suisse, which has been EVERYWHERE lately, was added as a lead manager.  For reference, Credit Suisse was only on one deal each for Q-1 and Q-2 (Gores Metropoulos and Crescent, respectively), but have now IPO’d two deals (SC Health and Oaktree).  Plus, they are on two more deals (Silver Spike as lead, and now Switchback) and it’s only the first month of the quarter.  Credit Suisse has clearly opted for “ludicrous speed” on the underwriting engine.

Additionally, RBC Capital Market and Tudor, Pickering, Holt & Co. were added as co-managers. Presumably, for the added benefit of their energy capabilities as well as potential for research coverage post-combination (assuming their analysts want to pick it up….let’s not try to climb the Chinese Wall).

Lastly, Switchback looks like they should attempt to price this Thursday, July 25th. Which, if Orisun and Fellazo  price this week as well, means SPACS will beat their previous record of seven SPACs priced in one month, by one more deal.  Switchback will make it number eight. However, there’s always the possibility of China Yunhong and Thunder Bridge II price next week as well to make it ten.