This week has been an interesting one for SPACs as we got some big announcements, SEC commentary, and saw Playboy Group Inc. (Nasdaq: PLBY) reach all-time highs after being added to Hedgeye’s best idea list.
Merging with a SPAC in October 2020 and trading under the symbol PLBY this past February, the stock price is up more than 300%.
Hedgeye sees massive upside, projecting Playboy Enterprises could be a $10 billion company from its current $1.5 billion market cap.
Realizing that it had to be more than a magazine, the company is in the midst of a major transformation as they make the brand more relevant to younger consumers; operating in the sexual wellness, style & apparel, and the beauty & grooming markets could help them continue to grow.
Playboy now even has a real-money casino game on Android.
This Week’s Major Deal
We also saw some major deals announced this week including one I want to focus on: Altimeter Growth Corp. (Nasdaq: AGC).
As I’ve talked about in the past, I always like to keep an eye out for great management, and the team behind Altimeter is second to none, being part of both the Roblox Corp. (NYSE: RBLX) and Stripe deals that valued these companies at double-digit billions.
This time Altimeter is bringing SoftBank Group Corp. (OTCMKTS: SFTBY) backed Grab public in a deal that could value this giant at $40 billion. Grab is the #1 Superapp in Southeast Asia’s offering ride-hailing, deliveries, and financial services with its digital wallet, GrabPay Card, and even loans and investments through its partners.
What I really like about this market is that Southeast Asia is still in the early innings of online disruption.
The penetration rate for food delivery is roughly half that of the U.S. and its electronic transaction volume is only 17% versus the US at 82%. Grab is a category leader and is projected to grow on average 40% a year through 2023. On top of that, they are also a profitable business.
If you would like to learn a bit more about the company, click here to check out its investor presentation.
While there have been no official rule changes out of the SEC, U.S. regulators have been in talks regarding a change in how warrants are categorized, moving them from being considered equity to liability.
While this could impact future SPACs and PIPE deals given the upside of warrants, I suspect this actually only impacts deals we do not want to invest in.
If this change does go into effect, it could actually weed out deals where early investors don’t think the return would be great enough.
While this means we could potentially see fewer deals hit the market, the deal quality may end up being better.
And that’s especially important in one of the most niche corners of the market right now: cannabis.
Cannabis stocks in America are already up an average of 189% this year, which means private companies are scrambling to go public and get access to that capital.
There’s one SPAC, in particular, that’s poised to bring the cream of the crop there, too.