SPAC Strategies Increasingly Drive Major Acquisition Investments

Frank Cardia guides Iron Edge VC as managing director and provides pre-IPO investment services focused on companies poised for growth. One strategy Frank Cardia offers is the special purpose acquisition company (SPAC), which is set up as a “blank check” company. It enables the raising of funds toward leveraged buyouts, prior to the target acquisition being determined.

With SPAC investment funds held within an FDIC-insured, interest bearing escrow account until the account reaches an appropriate level, a privately held target is ultimately identified by the SPAC team. At this point, SPAC investors are provided the opportunity to accept or reject the proposed acquisition, with a majority of shareholders’ approval required for the deal to move forward.

One high profile example of this strategy was in 2019, when Richard Branson offered 49 percent of Virgin Galactic, his space tourism enterprise, to a blank check company at a $1.5 billion valuation. This provided the necessary cash flow to enable SpaceShipTwo suborbital vehicle commercialization. It also presented a ready-made, less expensive and less time-consuming, route toward public listing. The results have been positive, with market capitalization quickly reaching $3.5 billion.

With that as a backdrop, Iron Edge has invested in a significant number of shares in Impossible Foods, which has a potential $10 billion to $12 billion IPO valuation range. SPAC strategies have been in play recently that may expedite and amplify this process in ways that could benefit investors who have been able to access Impossible Foods shares through Iron Edge.