This is the second edition of SPAC Weekly, an offering of Valuewalk.com, for the week of August 24th. The idea is to keep investors up to speed on Special Purpose Acquisition Corps, also known as SPAC’s, on a weekly basis. A SPAC is a blank check company created for the purpose of acquiring a private company. It is a backdoor route to taking a private company public while enriching the teams that executes on completing a deal. Due to the nature of what we just described Wall Street does not pay attention to SPAC’s and they often time are under the radar investments that come and go in cycles. They were all the rave in the 2005-2008 period, prior to the financial collapse, and were in hibernation for many years, but in the past couple years we have seen quite a few SPAC’s announced. Some transactions are really good, and some are awful, so please pay attention to the players involved and what they are buying. Investors will treat bad deals very harshly, either voting down the deal entirely or thrashing shares post-deal announcement. I have many examples of each.

The hard part writing weekly about SPAC’s is the unknown and infrequent announcement of a deal or IPO. Therefore, some weeks may be longer than others strictly due to this nature. We intend to keep this weekly update to the point and use terms any investor can understand, regardless of your experience level. We apologize to those who fully understand SPAC’s as we get those new to the space up to speed on the inner workings. Feel free to email us [email protected] for specific questions and we will do our best to respond in a timely fashion. Thanks for reading and we look forward to providing more color around all things SPAC’s. E-mail Troy at [email protected] to be put on the distribution list.

The purpose of this weekly update is not meant to be a recommendation to buy or sell SPAC securities but is for informational purposes only. Please do your own research and read the 300 plus pages of the S-1. We also try to be completely accurate with the information we report, so please excuse any misstatements and feel free to let us know in the comments section or an email. While we will attempt to keep the lists exhaustive of all deals, please feel free to let us know if you are aware of one that we missed, both North American and Europe listed.

SPAC Weekly 8/24: Special Purpose Acquisition Corps 101

New SPAC Announced:

First up this week is a newly announced SPAC, which filed on 9/19/2015. E- Compass Acquisition Corp (ECACU) announced that it completed an IPO of $40 million. The Company is a Cayman Islands exempted company, operating out of The People’s Republic of China. Cantor Fitzgerald is the sole underwriter on the deal. I am always skeptical about Chinese securities, but that has no bearing on this deal directly.

[drizzle]E-Compass, run by Richard Xu, who is also president of the Sino Mercury Acquisition Corp (SMAC), which merged with Wins Finance Group Ltd, on April 27, 2015.   Mr. Xu was previously an investment banker with Maxim Group LLC. Wins Finance Group is a leading integrated lending solution provider mainly serving small-and-medium-sized enterprises in Shanxi Province, China. The transaction is too new to comment on his track record in the SPAC world. The president of E-Compass is Chen Liu, formerly at Hongyuan Securities Co as a Director of Investments. He currently is the Chief Investment Director for Anhui Shengyun Environment Protection Group Co. “Amy” Peiling He will serve as the CFO, as she does for the Sino Mercury Acquisition Corp. She was previously at Deyu Agriculture Corp and Deloitte Touche Tohmatsu.

E-Compass will focus on e-commerce and consumer retail in the People’s Republic of China, but it will not be limited to a particular industry or geographic region.

Recently Announced Deal:

July 23, 2015– ROI Acquisition Corp II (ROIQ; ROIQW) has announced a proposed transaction to merge with Ascend Telecom Holdings Limited. Ascend is an independent provider of passive telecom infrastructure for wireless telecom operators in India. Upon completion of the merger, the current Ascend management team will remain in place.

More about this deal:

Some highlights from the press release announcing the merger of ROI II and Ascend are as follows:

  • Independent tower company with strategically located cell towers
  • Long-term contracts
  • Has a footprint of 4,843 towers
  • Fiscal year end 2015, generated $71 million in revenue and EBITDA of $24 million (up 17% and 32% respectively)
  • Pro forma enterprise value of $335 million, this would indicate ROI took on $210 million in debt, on top of the $125 million they had in cash in order to buy Ascend
  • Forward guidance: $77-80 million in revenue, and EBITDA of $28-29 million
  • Using forward guidance, it seems to be trading at 12x EV/EBITDA, which seems a tad rich, but some may argue the growth rates warrant such a multiple

The concern is that the same management team that watched Everywhere Global go bankrupt is backing this deal. While one could argue Ascend is a better company, Clinton Group was arguing Everywhere Global was a good company. The industries are vastly different and the silverware market is much tougher, as they had previously gone bankrupt. India has been a tough market, and we don’t focus on emerging markets, but the tower market is clearly a fast growing industry in India, where very few use cell phones at this point, but we would guess the number of cell users is growing rapidly.

On August 17, ROI Acquisition Corp II announced a change to the warrant structure, which makes the deal slightly more enticing.

Under the revised Warrant Amendment Proposal, warrant holders would have the option to either:

  • have their warrants survive and become exercisable for Ascend Holdings ordinary shares following the closing of the business combination transaction in accordance with the terms of the warrant agreement, as amended, governing ROI’s outstanding warrants; or
  • have their warrants exchanged at the closing for $1.00, comprised of $0.50 in cash and 0.05 of an ordinary share of Ascend Holdings.

ROI’s sponsor will forfeit all of its founder warrants and, as a result, the founder warrants will neither survive the business combination transaction nor be exchanged for cash or shares at the closing.

SPAC’s Without Deals Announced:

Pace Holding Corp (PACEU)

WL Ross Holding Corp (WLRH)

Hennessy Capital Acquisition Corp II (HCACU)

Quinpario Acquisition Corp 2 (QPAC)

Harmony Merger Corp (HRMN)

FinTech Acquisition Corp (FNTCU)

Easterly Acquisition Corp (EACQU)

Barington/Hilco Acquisition Corp (BHACU)

1347 Capital Corp (TFSCU)

Dundee Acquisition Corp (DAQ-UN.TO) – Canadian

Infor Acquisition Corp (IAC-A.TO) – Canadian

E-Compass Acquisition Corp (ECACU) – Chinese

Electrum Special Acquisition Corp (ELECU) – Focused on Gold

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