Charlie Ergen – the abrupt founder of Dish Network and a former professional gamer – is known for his relentless approach to business, from playing hardball with television networks, from card counting to blackjack (an incident which got him banned from ‘a Lake Tahoe casino).
This month, however, the billionaire revealed his intention to place his tokens on a new bet: he forms a blank check company called CONX Corp., seeking to raise $ 1 billion from investors in an IPO. stock exchange so that he and another Dish executive can find a private tech, media, or telecommunications company to go public.
To say that blank check companies, or as they are more commonly known, Special Purpose Acquisition Companies (SPACs) have a time would be an understatement.
This year alone, PSPCs have raised more than $ 48 billion, according to industry tracker SPAC Insider. This is more money collected than the previous 5 years combined.
“We’re surprised how quickly the market has exploded, but we’re not surprised that PSPC has become an asset class in its own right, much like how private equity has grown,” said former MGM CEO Harry Sloan, who alongside former CBS Entertainment. President Jeff Sagansky has launched 6 PSPCs over the past decade.
Flying Eagle Acquisition Corp., Sloan and Sagansky’s newest SPAC, announced plans to go public with the Skillz mobile gaming platform last month. They also handled what may be the most successful SPAC merger ever, when they went public with DraftKings last year through their Diamond Eagle. The sports betting and gaming company saw its share price drop from $ 10 when it went public to nearly $ 60 today.
As investor money streams in, a growing number of PSPCs are targeting the media, entertainment, games and sports sectors, including the efforts of Ergen and others of Gerry Cardinale of RedBird Capital (RedBall Acquisition) and Oaktree Capital (Oaktree Acquisition Corp. II, which has former Lifetime Global Director and Sony Andrea Wong among its members).
Even DraftKings CEO Jason Robins is getting into the game, partnering with Todd Boehly’s Eldridge Industries and MRC co-CEOs Modi Wiczyk and Asif Satchu on a $ 500 million SPAC called Horizon Acquisition Corp. II, which is looking for a “market-leading company in the media and entertainment industry that offers a unique product or service to consumers” (MRC is co-owner of PMRC, the parent company of Hollywood journalist).
But as SPACs grow, the question arises as to whether there are enough attractive private companies interested in matching one of them to go public.
There is no shortage of options for companies looking to raise funds, from IPOs to private equity, but merging with a PSPC has its pros and cons. So far this year, a handful of companies in the space have turned to blank checks for their fundraising needs, including streaming service CuriosityStream and Playboy Enterprises.
“From a trader’s perspective, I wanted to be able to tell the story and gauge investor interest, but be aware that if we were to go into this process, it was something we could plan for the future. Said Ben Kohn, CEO of Playboy, which announced its intention to merge with SPAC Mountain Crest Acquisition on October 1.
“[You can] develop the story with investors for a long time and if it doesn’t fly you don’t announce it, you never market it, no one ever finds out, ”Sloan says.
Playboy, best known for its eponymous magazine founded by Hugh Hefner, plans to use its PSPC cash infusion to pursue acquisitions and make other investments to grow its presence in the consumer market. The certainty of assessment and timing allows the company to plan its growth strategy.
Kohn noted Endeavor’s ill-fated IPO last year, citing it as an example of a move when the market was not doing well. “You’ve spent all that time bringing something to life for your organization, and then you don’t have anything to show for it. “
In other words, the PSPC process gives leaders some clarity in an otherwise uncertain process.
“Businesses are looking for certainty, businesses are looking to partner with a SPAC sponsor who can close the deal,” Sloan said.
Of course, there are also hurdles and drawbacks to the PSPC process. PSPC shareholders can approve any merger, and there is generally more dilution of the company’s stock than in other funding options. This can make after-sales service unattractive for companies that think they can get a better deal through a more traditional process.
“I own a big part of the business, the management team own a big part of the business, and yes we want to raise funds to accelerate our growth because the opportunity is before us, but we are also sensitive to dilution. we can take at the same time, ”said Kohn, noting that Mountain Crest offered less dilution than other SAVS on the market.
This competition can go both ways, as Sloan and Sagansky note that with the flurry of new SAVS, many are dangling more attractive deal terms like a carrot to attract potential merger partners.
The founders of SPAC therefore look to their strengths when looking for potential companies. It could be a financial force, as some Hedge Fund-backed SAVS claim, or a force in a particular industry, as in the case of Ergen (CONX praises Ergen’s “track record” regarding TMT industry disruption ”). Or it could be an experiment in the SPAC space itself.
Despite the massive influx of money, Sloan notes that what underlies all successful PSPCs in the media, entertainment, sports, and gaming space is the combination of content and technology.
“Everything converges, media converges with entertainment which converges which technology, which converges with e-commerce, converges with global mobile platforms,” said Sagansky.
This convergence is where PSPCs can be most useful, helping companies without clear comparables to raise funds and go public, without the drama of an IPO.
“PSPCs are not particularly suitable for traditional media companies, but for the very fast growing sectors of the media industry, namely mobile games,” says Sagansky. “These are things that are harder to rate, they don’t have a comp, we always say we want to offer deals where there isn’t a comp, where they stand on their own and bring out a separate category. in themselves. “
A version of this story first appeared in the October 7 issue of Hollywood journalist magazine. Click here to subscribe.