Connect with us

IPOs / FFOs

Ex-Cosmo editor teams up with ice hockey owner in Spac deal

Published

on


The former editor-in-chief of Cosmopolitan and the co-owner of the New York Islanders ice hockey team are preparing to launch an obscure securities clearing and custody firm on the New York Stock Exchange, using their blank-cheque company to snap it up in a $4.7bn deal.

Northern Star Investment Corp II, a special purpose acquisition company launched 11 days ago to target opportunities in emerging markets and the consumption habits of Millennials and “Generation Z”, has agreed to merge with Apex Clearing, owned by private equity group Peak6 Investments, it said on Monday.

The deal for Apex — part of the plumbing behind digital wealth businesses like Goldman Sachs’s Marcus and broker WeBull — is the latest sign of a craze for so-called Spacs, which rank among the hottest investments in finance. Institutional funds had $82.4bn in the vehicles at the end of the fourth quarter, compared with $22.7bn a year earlier, according to Spac Research.

It also suggests that companies helping to facilitate the fast-growing amateur investing industry are in demand. Apex has ridden the boom in online trading in the past year, as young investors have flocked to tech-related options on stocks like Tesla and piled into “meme stocks” like consoles retailer GameStop and cinema operator AMC.

The company has handled thousands of these deals every day in US equities and options markets, as well as handling fractional share trading, and building a presence in cryptocurrency markets.

Apex serves around 200 financial institutions, which control more than 13m customer accounts. Of that total, 3.2m have been opened this year and more than 1m are crypto accounts.

Northern Star is run by Joanna Coles, a former journalist and magazine chief, and Jonathan Ledecky, who has co-owned the New York Islanders franchise since 2014. The deal, which includes debt, will give Apex an enterprise value of around $4.7bn. Apex is expected to hit the market in the coming three to four months, subject to regulatory approval.

Coles described Apex as being “at the nexus of the digital financial services revolution”.

“Apex is the independent, invisible architecture that has helped launch many of the most notable fintech disrupters of our time, enabling the frictionless experiences we have all come to expect when interfacing with digital investing products,” she said.

Apex handled clearing for Robinhood Financial until the broker took on the responsibility for managing its own customers’ deals in 2018.

At the height of the volatility in “meme stocks” like GameStop in January, online broker WeBull had to restrict trading in selected stocks as Apex could not afford the costs of settling the outsized volume of deals, said WeBull chief executive Anthony Denier.

Coles, who also edited Marie Claire and worked for the Times and Guardian newspapers in New York, will join the Apex board. She also sits on the board of Snap, the parent of messaging app Snapchat.

Apex is expected to raise $850m in gross proceeds from the deal, which includes a private investment of $450m, supported by Fidelity Management & Research Company and Baron Capital Group.

Citigroup was the exclusive financial and capital markets adviser to Northern Star and sole placement agent for the share offering. JPMorgan Securities was sole financial adviser to Apex. 



Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

IPOs / FFOs

Dual-class shares: duelling purposes | Financial Times

Published

on

By


The ship looks set to sail on Britain’s aversion to dual-class shares. A government commissioned review, released on Friday, backs the structure, which is popular with tech founders keen to retain control after taking public money.

Lex, among others, has opposed weighted voting rights as poor governance. Advocates point to the bigger picture: spurn dual-class shares and lose out on big initial public offerings. London would not be the first to cave. A similar argument saw Hong Kong capitulate after Alibaba took its record $25bn IPO to New York in 2014. Singapore swiftly followed suit; even Shanghai now hosts companies with dual-class shares on its tech-oriented board.

Ron Kalifa, author of the UK report, lays out the numbers: the US nabbed 39 per cent of the 3,787 IPOs on major exchanges between 2015 and 2020, while the UK took under 5 per cent. US companies with dual-class shares have outperformed peers, but this is as much to do with tech credentials as, say, Mark Zuckerberg’s stranglehold on Facebook votes. Proponents also applaud the poison pill conferred by weighted voting rights. This, they say, would have seen off pesky foreign buyers of British assets such as Arm and Worldpay, coincidentally Kalifa’s own old shop.

If dual-class shares are inevitable, curbs should be too. Sunset clauses, converting founders’ shares to ordinary class over time, are one obvious step already in use. At Slack, for example, shares convert over 10 years to common stock. Another is to exclude certain votes; on executive pay, say, or related party transactions.

One big caveat: dual-class shares will not open the floodgates to new listings. Ask Hong Kong, a market four times as liquid as London. Post-relaxation of the rules, China tech listings continued to flock to the US because valuations are higher. Last year, despite ground-zero Sino-US relations and tightened accountancy rules, Chinese tech companies flocked to the US. The current run of “homecomings” — US-listed companies such as Alibaba securing secondary listings in Hong Kong — is politically driven. More effective, certainly, but not an option for the UK.

Our popular newsletter for premium subscribers Best of Lex is published twice weekly. Please sign up here



Source link

Continue Reading

IPOs / FFOs

A Lucid sign of the tech bubble

Published

on

By


This week, tech stocks dipped and a generation of entrepreneurs was offered a glimpse of its own mortality.

At the very least, it has been a reminder that a reset is long overdue after a year-long surge in tech stocks — and that capital will not always be as readily, and cheaply, available.

When cash is plentiful, the close alignment between Wall Street and Silicon Valley can feel almost unbreakable. Tech start-ups promising to change the world supply the big vision for investors eager to find a reason to believe. Conditions like this favour so-called story stocks — ventures that can spin a simple narrative about a huge new market opportunity.

A classic of the genre is the electrification of personal transport. This week’s additions to the dream of a world beyond combustion engines include the $4.6bn flowing into luxury electric car maker Lucid Motors and the $1.6bn raised by would-be air taxi service Joby Aviation.

Despite the obvious risks when a wave of capital washes into tech start-ups, there are some benefits. It can, for instance, help to drag new technologies into the mainstream: the tech and telecoms bubble at the turn of the century may have led to huge financial waste, but it funded the communications networks and digital infrastructure to support the next generation of internet companies.

It also means promising technologies are no longer at risk of being underfunded — though simply pouring in cash won’t bring them to commercial viability any quicker. It has taken many years for battery technology to ride the cost curve. The fact that billions of dollars are suddenly available cannot speed that process. Yet Wall Street’s financial vehicle du jour for channelling money into tech start-ups — so-called special purpose acquisition companies that raise cash and then seek a promising company to merge with — come with two very big warning signs.

The first is that, in this new form of stock market-financed venture capital, windfall profits can flow to promoters and speculators long before the new businesses prove their commercial viability. Traditional venture capitalists usually don’t see profits, or get the chance to sell, for years.

The different incentives embedded in Wall Street’s version of VC is exemplified by the Lucid deal. On paper, the Spac involved has already made an 87 per cent profit from its investment, just for doing a deal. And its promoters, who paid a grand total of $25,000 for their “founder shares”, are sitting on a stake the market values at $1.5bn.

The Spac has also provided a vehicle for wild speculation. Its publicly traded shares had already shot up more than fivefold in anticipation of a deal, before falling back by nearly half.

There are some mechanisms to encourage a longer term view, such as placing limits on how soon a Spac’s promoters or follow-on investors can cash out. But the 18 months lock-up on the Lucid Spac’s founders is nothing compared with the many years traditional VCs often have to wait to see a return.

The second concern is that the current close alignment between investors and entrepreneurs is highly unlikely to last. Financial conditions will change. Even with perfect execution over many years of the promises made by start-ups, it will be hard for the new companies to support their current valuations.

Unlike companies that arrive on Wall Street through a traditional initial public offering, Spacs make revenue promises upfront. Joby says it will not have any sales at all until 2024, but then reach $2bn in revenue five years from now. Lucid, which has not launched its first vehicle, is predicting that annual revenue will rise above $20bn within five years — a figure that Tesla only topped in 2019.

These promises are supporting heady valuations. Lucid is judged, on paper, to be worth $24bn. Tesla only reached that after it had been making and selling cars for five years, and a year after its groundbreaking Model S had hit the road.

It may be the case that the world is on the way to more electrification, with luxury cars like those made by Lucid, and air taxis like those operated by Joby, an important part of a clean energy future. But when times change on Wall Street, many investors may no longer have the patience to go along for the ride.

richard.waters@ft.com



Source link

Continue Reading

IPOs / FFOs

Soho House plans to list in New York with $3bn valuation

Published

on

By


Soho House, the private members’ club group, is making plans to list in New York as early as next month in order to capitalise on investor appetite for travel and leisure stocks as the pandemic subsides.

The company intends to join the stock exchange with a valuation of as much as $3bn, despite the closure due to coronavirus restrictions of 11 of its 27 clubs across Europe, Asia and the US, say people familiar with matter.

Speculation that the target price will rise from a $2bn valuation set in a $100m funding round, led by its majority shareholder the US billionaire Ron Burkle in June last year, is based on anticipation of a boom in demand for travel stocks.

The hospitality group, which also owns 20 restaurants, 16 spas and two cinemas, declined to comment on the plans, first reported in The Times.

Shares in the hotel company Marriott are up 26 per cent since February, while Airbnb’s share price has increased more than 40 per cent since it listed in December.

Despite steep drops in revenues as a result of sites being closed, Soho House has managed to retain more than 90 per cent of its paying members during the pandemic. A typical annual membership costs £1,750.

However, Soho House’s recently filed accounts show the company stopped making interest payments on its loan in cash last year, instead choosing to use a “payment in kind” option. This allows companies with limited cash flow to pay lenders with more debt instead.

Permira Debt Managers, the credit arm of the private equity house, originally provided this £350m loan to the private members’ club in 2017, describing the debt deal as its “largest ever direct lending investment” at the time.

The private debt deal came two years after Soho House had to scrap a £200m high-yield bond sale, as investors balked at the company’s high leverage and limited free cash flow.

It is the second time Soho House has mooted a stock market flotation.

It pulled a planned New York listing in 2018, saying it did not need to raise capital as it had Permira’s backing and its owners — who include Burkle, the hospitality entrepreneur Richard Caring and Soho House founder Nick Jones — did not want to sell out.

Jones, who opened his first Soho House in 1995, told the Financial Times last year that the group did not need to consider a listing as “there is a nice lot of demand from people to invest in the company as it is”.

Over the past 26 years, Soho House has grown rapidly, becoming a hotspot for celebrity guests by targeting wealthy urbanites in the creative industries.

According to its 2019 accounts, it made £293m in revenues, 49 per cent of which came from food and drink sales and 20 per cent from members’ subscriptions with the remainder coming from its own-brand range of homewares. It reported a pre-tax loss of £77m.

During the pandemic, the group was forced to lay off 1,000 of its 8,000 employees.



Source link

Continue Reading

Trending