Elliott Management Corp., the hedge fund best known for its high-profile shareholder activist campaigns, wants to get in on the sweltering SPAC craze.
The company, founded by billionaire Paul Singer, has spoken to bankers about raising more than $ 1 billion for a special purpose company, according to people familiar with the case. They warned that the process is still in its early stages and plans are subject to change.
Assuming Elliott makes progress, it could use the proceeds to buy a significant company – potentially worth billions in double digits based on the goals agreed upon with blank checks of similar size.
SPACs are empty shells that raise money for the sole purpose of finding a target to merge with and make public in the process. They have gained enormous popularity as they provide a lucrative shortcut to the public markets. So far this year, at least 116 SPACs have raised $ 35 billion, putting the market on track to break last year’s record of more than $ 80 billion, according to SPAC Research. Only 10 new SPACs were launched on Friday.
They often have big investors or celebrities, such as former Yankees star Alex Rodriguez and ex-House Speaker Paul Ryan. Many of Elliott’s hedge fund rivals have already established their own SPACs, but Elliott, an inveterate deal maker, was a notable absence from the party.
It is not clear which industries Elliott could set his sights on. SPACs typically give investors an idea of the type of business they could target, but can easily change course.
Elliott, with approximately $ 42 billion under management, has campaigned with companies as diverse as AT&T Inc.
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and Marathon Petroleum Corp.
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in recent years. Her private equity partner, Evergreen Coast Capital, focuses on technology, having previously participated in the acquisitions of healthcare software company Athenahealth Inc. and enterprise software company LogMeIn Inc. Elliott also bought bookseller Barnes & Noble Inc. in 2019.
Other activists with SPACs already on the hunt for targets include Jeffrey Smith’s Starboard Value LP and William Ackman’s Pershing Square Capital Management LP. Mr. Ackman’s vehicle, Pershing Square Tontine Holdings Ltd.
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, raised $ 4 billion last summer, making it by far the largest SPAC ever and allowing him to get potentially a very large target. SPACs often raise extra money in conjunction with a deal, also known as a private investment in public equity, or PIPE, which can push deal values even higher.
Of the hundreds of SPACs raised in recent history, only 12 have raised more than $ 1 billion in revenue, according to data provider SPACInsider. Smaller vehicles can look to a wider universe of targets and can always raise additional funding through a PIPE, said SPACInsider founder Kristi Marvin. “The argument for the larger SPAC is that it is easier to negotiate with a company if the money has already been raised,” she said.
The largest SPAC deal in 2020 brought public mortgage provider United Wholesale Mortgage worth approximately $ 16 billion, followed by a $ 12.5 billion deal to merge two investment companies – Owl Rock Capital Partners LP and Dyal Capital Partners. while making them public at the same time.
Write to Cara Lombardo at [email protected]
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