The IPO Buzz: SPACs in the Spotlight

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The pending IPO is Seanergy Maritime (AMEX: SRG-U proposed), an Athens, Greece-based “blank check” company that was formed to acquire a maritime shipping business. The company plans to offer 20 million units at $10 each. That’s above its original filing of 15 million units. Its bookrunner, Maxim Group, has no pricing date other than sometime this week or next, depending upon when the SEC signs off on the deal.

Record Territory

When Seanergy gets priced — this week or next — bankers will have underwritten 39 SPACs in 2007, according to SEC filings. They will have raised $4.75 billion.

Those figures have already pushed 2007’s SPAC traffic into record high territory. The previous record was last year, when bankers priced 38 SPACs that raised $3 billion. But stay tuned. There’s more.

As of Friday, Aug. 24, 2007, there were another 45 SPACs in registration, looking to raise $6.1 billion.

In 2005, bankers priced 29 SPACs that raised $1.98 billion.

In 2004, four SPACs were priced that raised $237 million.

There’s a reason for the current groundswell.

A New Breed of SPACs

Today’s SPACs are structured to attract the most conservative institutional investors. You’ll find such names as Harvard College, Jana Partners, T. Rowe Price and others as shareholders of many SPACs.

Yesteryear, it wasn’t that way. Those “blank check” offerings were targeted toward the most unsophisticated individual investors. In the end, many lost their shirts.

Today’s SPAC offerings are a different breed. Their popularity stems from the following factors:

  • Well over 95 percent of the proceeds raised from the sale are placed in trust and are invested in U.S. Treasuries. And in some cases, 100 percent of the proceeds are invested.
  • The quality of the management team that comes together to execute a SPAC’s acquisition plan has been improving, according to informed sources.
  • The SPAC has a specified time period, usually 18 months, to complete the plan. When it finds a target, the investors are given the option to accept or to opt out. If they choose the latter, they get their investment back plus accrued interest.
  • If a SPAC fails to complete its plan, it is dissolved. And, this is a crucial element: Investors get their money back – plus accrued interest.
Let’s take a look at one of this year’s success stories.

Symmetry Holdings (Nasdaq: SHJ-U) priced 18.75 million units at $8 each on March 8. On June 21, Symmetry announced plans to acquire Novamerican Steel (Nasdaq: TONS), a Canadian steel fabricator, at $56 per share. The same day, Symmetry closed at $9 per unit, UP 12.5 percent from its initial offering price.

As one Wall Street syndicate manager put it: “Buying a SPAC is like investing in Treasuries, except you can make a little or you can make a lot.”

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