It has been another choppy week for the broader markets and SPACs, but the excitement could be coming back as we saw a big pop on a definitive agreement announcement. Fintech Acquisitions Corp. V (NASDAQ: FTCV) was up over 40% on the report that they will merge with the social trading platform eToro.
While the trust value was on the smaller side with this one at $250,000 million, it was led by Betsy Cohen, the SPAC veteran who brought Payoneer to market through FTAC Olympus Acquisitions Corp (NASDAQ: FTOC). The eToro deal will also include a $650 million PIPE so the trust size does not matter as much in this case.
This all leads me back to my #1 rule for investing in SPACs, pick the right management team. These people are putting their reputation on the line and they are looking for the best deals to bring to market. Going with a seasoned management team can give you better odds of success when it comes to deal selection.
Even the SEC is making a point of this saying to be careful with celebrity involvement as that does not mean instant success.
That is why I’m looking at Soaring Eagle Acquisition Corp (NASDAQ: SRNGU). This SPAC is led by Harry Sloan who previously served as the Chairman and CEO of MGM. While you may not recognize his name as well as Eli Baker who is serving as the CFO, you probably recognize the deals that they have recently completed.
They brought DraftKings Inc. (NASDAQ: DKNG) and Skillz Inc. (NYSE: SKLZ) to the market. Not only are they two of the most successful gaming and gambling stocks on the market, but two of the most successful SPACs in a hot sector.
DraftKings is up over 600% since going public and Skillz was up over 300% in the first several months of trading. Both have also produced strong results during earnings, something you don’t see in a lot of SPACs that have merged with pre-revenue companies.
The S-1 filing for Soaring Eagle does not give much information on what type of business they are looking to target. Unfortunately, the text is relatively boilerplate regarding a target in a high-growth industry and market. However, given its recent successes with DraftKings and Skillz, it is very possible they target this sector or a similar space once again.
And just like having a veteran management team is a good indicator of how to make the biggest possible profits in choosing SPACs, good expertise can make all the difference in nearly any cutting-edge investment sector.
For example, in the new and fast-emerging world of cryptocurrency, Tom Gentile, America’s #1 pattern trader, is projecting a chance for 1,000% gains by the end of 2021. Bear in mind, this is from a sector where some tokens have delivered up to 200,000% gains in just 30 days in the past.
And Tom can show you the next big recommendations for making the most of this sector’s potential. All you have to do is click here to get started.
By the Numbers
Another criteria for selecting a top SPAC is the amount of money they were able to raise and Soaring Eagle has raised quite a war chest. At $1.5 billion, this is one of the largest SPAC raises and significantly larger than any of their past deals. This just shows how much demand there is for a quality team.
It also gives the team optionality to go after well-known targets. There are companies out there like Epic Games, Fanatics, or even FanDuel, a competitor to DraftKings that could enter public markets through a SPAC.
Trading under $10.50, Soaring Eagle units are trading at less than a 5% premium to redemption value, which seems like an outlier for such an experienced and well-known sponsor. These units also come with warrants that are equal to 1/5 a share.
This could be viewed as a negative given the small number of shares given in warrants, but I believe there is a major positive here in that there will be less dilution in share count leading to a better-valued deal.
While there were other SPACs from this team in the past that have performed less than optimality, given its recent successes and the fact that it is trading so close to NAV could present a good time to consider investing in this SPAC with limited downside.