3 SPACs That Are Trading Below $10

Nearly all special purpose acquisition companies (SPACs) IPO with a net asset value (NAV) of $10. The blank check company will then search for a target to merge with, and those deals are also typically done at the same $10 NAV regardless of where the stock may be trading at in the open market. With SPACs and other speculative investments getting clobbered over the past couple of months, some SPACs have even dipped below this threshold.

It’s not very common for SPACs to trade below $10, especially since SPACs have a redemption feature that allows investors to exchange their shares for $10 plus interest in many cases. That means that SPACs trading below $10 offer modest arbitrage opportunities. Here are 3 SPACs that have identified targets that are trading below NAV (stock prices are updated hourly).

Collective Growth

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Of the SPACs that are below $10, Collective Growth (NASDAQ: CGRO) is trading at the biggest discount to NAV. The SPAC announced in December that it would be merging with Innoviz Technologies, a startup that is developing solid-state lidar sensors and perception software that it hopes will be utilized in autonomous driving systems.

Innoviz currently has negligible revenue, just $5 million in 2020 that is expected to grow to $9 million this year. The company is forecasting $581 million in revenue in 2025. The deal with Collective Growth valued Innoviz at $1.4 billion and would provide approximately $350 million in gross proceeds, assuming no redemptions by public shareholders.

The SPAC announced this morning that its shareholders have voted to approve the merger, but that roughly 891,000 shares were submitted for redemption. Those shares would represent around $8.9 million that Innoviz will not receive, and suggest that some investors were unhappy with the deal. With the merger approved by investors, the deal will close imminently and the ticker symbol will soon change to “INVZ.”

Cerberus Telecom Acquisition

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Announced last month, Cerberus Telecom (NYSE: CTAC) is merging with KORE, which provides Internet of Things (IoT) offerings as part of its Connectivity-as-a-Service (CaaS) platform. KORE lets customers deploy, manage, and scale their IoT solutions and sees 5G adoption as a key catalyst for growth in the years ahead. The company has an existing revenue base estimated at $214 million for 2020 and says that its subscription-based model provides greater financial visibility. 

The deal will provide KORE with around $484 million in gross cash proceeds while valuing the company at an enterprise value of just over $1 billion. The merger is expected to close in mid-2021.

Fusion Acquisition

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Investors had high hopes for Fusion Acquisition (NYSE: FUSE) since it is run by Jim Ross, an early pioneer of ETFs. With shares trading below $10, Fusion shareholders seem to be disappointed with the merger with MoneyLion, which was announced in February. MoneyLion is a digital financial services platform that offers a variety of products such as mobile banking, cash advances, and a program to help improve credit scores. 

Revenue in 2020 is estimated at $76 million and forecast to grow to $424 million in 2023 as MoneyLion strengthens monetization by cross-selling more products to customers. The platform currently has about 1.4 million customers and MoneyLion hopes to grow that figure to nearly 7 million over the next two years.

The merger values MoneyLion at $2.9 billion and should add gross cash proceeds of $526 million to the combined company’s balance sheet.

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