SPACs became part of the investing world’s vernacular in 2020. For sports specifically, the success of DraftKings going public by SPAC last April has sparked a wave of blank-check ventures from sports business executives and other people looking to capitalize on the valuations of sports teams, sports betting firms and technology opportunities. Sportico has identified 102 SPACs that have a sports connection or sports-focus, from one of the first SPACs—a 2008 effort by Hank Aaron and Jack Kemp—through recently formed FAST Acquisition II, a group that includes Ndamukong Suh and which likely has non-public paperwork with the Securities & Exchange Commission. All told, 35 sports-related SPACs have been formed in 2021, and have raised or want to raise a total of $9.1 billion. In 2020, 53 sports figures and sports-business SPACs raised $20.5 billion. Some of those have already closed their deals, while some $13 billion of sports-SPAC money is still in the market seeking businesses—from pro franchises to media businesses to apps.
Even as SPACs have flooded the market, they remain a vehicle only partially understood by many, so Sportico has provided a primer along with a list of sports-related SPACs identified from regulatory filings.
What are SPACs? Companies that raise money in an IPO and then find another company to buy. For that reason they’re also called blank checks: Management is given a pile of cash to find something—anything—to buy. SPACs typically state what they want to buy—say, a technology firm or a mid-sized U.K. company—but they aren’t obligated to limit themselves. Think of them as Wall Street’s cult of personality: SPAC founders—called sponsors—are essentially saying, “Trust me, I’ll pull off a great deal.” The trade-off is the clock keeps ticking: SPACs usually have two years to find an acquisition, and can’t start looking until the IPO. If they fail, SPACs need to return the money they raised back to shareholders. Plus, if shareholders don’t like the proposed acquisition, they can demand their original capital back.
Why do SPACs exist? Any company a SPAC buys could go public by its own IPO or perform a reverse merger, where it buys a company for its stock listing. IPOs demand a little more money and time than a SPAC, but mainly, companies tend to leave money on the table during an IPO, especially in bull markets. In 2020, the average IPO rallied 42% its first day of trading, according to University of Florida finance professor Jay Ritter. That means companies underpriced their stock at the IPO and missed out on $200 million on average, according to Ritter. A reverse merger is quicker and cheaper, but it’s frowned upon as a move lesser-quality companies do. Sports-centric FuboTV, however, successfully went public in 2020 by reverse merger.
What’s in it for everybody? For the SPAC, a lot. The sponsors get cheap stock when they close an acquisition. This stock, called the “promote,” often can be sizable, up to 20% of the new company. That incentivizes SPACs to buy something—anything—before their two years are up. (In higher-quality deals, the company being bought will demand SPACs slash their promote.)
For the company merging with the SPAC, it gets to go public at a market valuation it negotiates ahead of time. That means no post-IPO runaway shares that leave company executives with the nagging feeling they’ve been cheated by the bankers.
For investors? A low-risk bet. Since you can demand the initial share price back (less expenses and with interest earned) until after the pending deal is announced, your downside is protected. You’re really just paying opportunity cost—the possibility that you could have invested in something else for those two years and made money. The upside is SPACs usually throw in partial warrants for every share as incentive for investors to get in early (warrants de-couple from shares around 45 days after the SPAC IPO). Shares are usually priced at $10, with the warrants executable at $11.50. That means a popular deal can pay off handsomely.
Why are SPACs appealing in sports business? One little-discussed wrinkle is the fact a company merging with a SPAC doesn’t have to do a lot of public posturing. For an IPO, executives go on a roadshow, where they travel for a week or more to drum up interest for fund managers to buy shares. Quite frankly, a lot of successful leaders don’t want the retail politicking that comes with a roadshow, according to Don Duffy, CEO of ICR, an advisory firm that works with many SPACs. That may be a reason why sports teams and large private sports business companies are exploring going public by SPAC when they’d otherwise never consider an IPO. The downside is that if a company successfully goes public by SPAC, those executives will have to face the same attention every other public company does, Duffy noted.
Why am I hearing about SPACs everywhere? SPACs have been around in some form since the 1980s, and the idea has been around even longer, in the form of ‘blind pools’ that started out raising money to give to a general partner to find investments. Regulatory reforms—like holding IPO capital in a trust account—have made the SPAC approach more appealing for shareholders. Also, the ability of SPACs to bring in outside capital to close a deal, known as private investment in public equity—PIPE—allows firms to sidestep former abuses by hedge funds. In the past, funds would gobble up enough shares to veto a deal, forcing SPACs to alter proposed merger terms in the hedge fund’s favor to earn approval. Now, thanks to PIPE financing, a SPAC doesn’t actually need a majority of shareholders to vote in favor to consummate a deal. All of that has made SPACs more popular than ever, according to data from SPACalpha, a researcher. Through the first six weeks of 2021, 275 SPACs have filed or held their IPO—more than all of 2020.
To view a searchable table of sports-related SPACS, click our Sportico Sports SPAC Tracker.
More information on SPACs listing a sports-business focus is listed below:
890 5th Avenue Partners, named after the fictional Avengers Mansion, is from media veterans John Kosner and Emiliano Calemzuk. It has $250 million to secure a sports media, sports betting, esports or fitness platform as a targets.
Ace Global is a Chinese national-led esports blank check looking to raise $40 million to buy businesses in Asia. CEO Eugene Wong was chief investment officer of Sony’s China Hero Fund, an effort to incubate mainland China developers for the Sony Playstation 4.
Acies raised $200 million to acquire a business in “sports, sports betting and iGaming.” In February it inked a deal to bring Playstudios, a maker of mobile slots and blackjack games, public. Former MGM executive James Murren leads the SPAC, and Zach Leonsis of Monumental Sports (Washington’s Wizards, Capitals) is on the board of directors.
Arctos Northstar is a SPAC from sports-focused private equity firm Arctos co-founder Doc O’Connor and Arctos executive-in-residence Theo Epstein. With an eye on sports teams, leagues and sports-related technologies, the SPAC collected $275 million in an IPO.
Artemis Strategic has a focus on sports betting, sports, casinos and fitness for a target. Led by Holly Gagnon (former CEO of Seneca Gaming) and Philip Kaplan (CEO of GameWorks), it is looking to raise $150 million in an IPO.
Ascendant Digital has $414 million for a target in esports or entertainment. It’s led by British video game executive Mark Gerhard. A second Ascendant Digital SPAC has registered with the SEC, but has yet to make any public filings.
Athlon Acquisition is focused on fitness technology with the $240 million it raised. Boston Celtics owners Wyc Grousbeck and Mark Wan as well as Paraag Marathe, who works for the San Francisco 49ers, and Live Nation’s Jared Smith are involved.
Austerlitz Acquisition is one of five SPACs from Las Vegas Golden Knights owner William Foley and the only one that specifically suggests in its offering document that sports could be a target. The SPAC is aiming to raise $500 million in an IPO.
Black Ridge was a $138 million blank check formed by a wildcatter of the same name to seek oil and gas businesses. Instead, it brought Allied eSports Entertainment public, which is now may be exiting the sports business altogether, selling the World Poker Tour and considering unloading its esports arm.
BowX aims to use its connections in the “sports and entertainment world, including athletes and entertainers” to find a business in technology, media and/or entertainment. Sponsor and Sacramento Kings chairman Vivek Randavivé has $420 million to use.
Bull Horn IPO’d for $75 million for a sports and entertainment business. Sports marketer Rob Striar, Como 1907’s Michael Gandler and NBA veteran Baron Davis are involved. A second Bull Horn has filed with regulators, indicating a potential IPO to come, although no documents have been made public.
dMY Tech raised $200 million and brought Rush Street Interactive to the stock market.
dMY Tech II is merging with Genius Sports in a deal valued at $1.5 billion that should close by early 2021. dMY II collected $276 million from its IPO.
Flying Eagle used its $690 million from its IPO to bring Skillz public. It’s a mobile gaming platform with the NFL venture capital fund, 32 Equity, among its early backers.
Goal Acquisitions is a $225 million SPAC that saw strong demand for its offering. The Harvey Schiller, David Falk led firm seeks a pro franchise or other sports business.
Gordon Pointe formed in 2017 to seek a financial service firm. Instead, it brought football-themed real estate developer Hall of Fame Resort & Entertainment public in 2020.
Landcadia II is one of Tilman Fertitta’s four SPACs, all of which focus on hospitality and gaming. His second blank check brought Golden Nugget Online Gaming public using $275 million it raised.
Marquee Raine considers a sports team, gaming business or media enterprise fair game for its $374 million. It’s led by Chicago Cubs co-owner Tom Ricketts as well as bankers from Raine Group.
Monument Circle is former Seattle Mariners owner Jeff Smulyan’s venture. He gathered $218 million for sports media at the IPO.
PTK is led by tech veterans who are looking to use $100 million they have raised to get a gaming or esports business, possibly in the Asia-Pacific region.
RedBall, led by RedBird founder Gerry Cardinale and Oakland A’s executive Billy Beane, raised $575 million for a sports team or related media or analytics firm. Since its tentative deal for Fenway Sports Group fell through, speculators drop the RedBall name with every sports deal that comes.
Slam Corp. is A-Rod’s SPAC effort to locate a sports, media or entertainment business (but not a team). Slam raised $500 million in a February 22 IPO.
Sports Entertainment, which boasts an NFL-heavy team (Eric Grubman, John Collins, Natara Holloway), raised $400 million to pursue a sports-focused tech company.)
Sports Properties Acquisition Corp. What do you get when you bring Hank Aaron, former Bills QB and vice presidential-nominee Jack Kemp, Mario Cuomo and a New York taxi medallion tycoon (Andrew Murstein) together in a SPAC? Two years of futile bids on the Cubs, Canadiens and Florida Panthers. The very first sports SPAC dissolved with no deal in 2010.
Sports Ventures, from Atlanta Falcons limited partner Alan Kestenbaum, Rob Tillis of Inner Circle Sports and Daniel Strauss of SportBLX, have $200 million for a sports media effort.
Tekkorp Digital is led by Matt Davey and Robin Chhabra, casino gaming and sports betting executives. They have collected $250 million to buy into digital media or sports.
Vistas Media sees esports, media or gaming as a potential field for an acquisition. Management, which has a background in India and crypto, has raised $100 million.
Yucaipa Acquisition hasn’t a specific target besides wanting a turnaround project. Pittsburgh Penguins co-owner Ron Burkle leads this $300 million effort.
