Elliott Management Corp., the hedge fund best known for its high-profile shareholder activist campaigns, wants to join the furious SPAC craze.
The firm, founded by billionaire Paul Singer, has met with bankers to raise more than $ 1 billion for a special-purpose acquisition company, according to people familiar with the subject. They warned that the process is at an early stage and plans could change.
Assuming Elliott moves forward, he could use the revenue to buy a sizeable company, potentially worth billions of digits based on the goals that similar-sized blank check companies have agreed to combine.
SPACs are empty deposits that raise money for the sole purpose of seeking a goal with which to merge and which in the process is made public. They have exploded in popularity because they offer a lucrative shortcut to public markets. So far this year, at least 116 SPACs have raised $ 35 billion, setting 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 feature well-known investors or celebrity sponsors such as former Yankee star Alex Rodriguez and former House Speaker Paul Ryan. Many of Elliott’s hedge fund rivals have already raised their own SPACs, but Elliott, an inveterate deal maker, had been a notable absentee from the party.
It’s unclear in what industries Elliott might have his gaze. SPACs usually give investors an idea of the type of business they can target, but they can easily change course.
Elliott, with approximately $ 42 billion managed, has campaigned in companies as diverse as AT&T Inc.
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and Marathon Petroleum Corp.
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in recent years. Its privately held subsidiary, Evergreen Coast Capital, focuses on technology, having previously been involved in the acquisitions of health software firm Athenahealth Inc. and enterprise software company LogMeIn Inc. Elliott also bought the bookstore Barnes & Noble Inc. in 2019.
Other activists with SPAC already looking 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 the largest SPAC in history and setting it to achieve a very large goal. SPACs usually raise additional funds along with an agreement, known as a private investment in public capital, or PIPE, which can send deal values even higher.
Of the hundreds of SPACs raised in recent history, only 12 have raised revenue of more than $ 1 billion, according to data provider SPACInsider. Smaller vehicles can look at a larger universe of targets and can always get additional funding through a PIPE, said Kristi Marvin, founder of SPACInsider. “The argument for a larger SPAC is that it’s easier to negotiate with a company if the money has already been raised,” he said.
The largest SPAC deal in 2020 released mortgage maker United Wholesale Mortgage at a valuation of approximately $ 16 billion and was followed by a $ 12.5 billion deal to merge two investment firms – Owl Rock Capital Partners LP and Dyal Capital Partners — and make them public simultaneously.
Write to Cara Lombardo a [email protected]
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