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Exclusive: Phyllis Newhouse And Isabelle Freidheim Are Busting Up The SPAC Boys’ Club By Bringing Athena To Market

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During Phyllis Newhouse’s 22-year career in the military, the cybersecurity expert took a two-week class in networking at the U.S. Army Senior Leadership Academy. The test at the end of the course was a doozy: Every officer was required to know and explain the ways in which her 100 classmates connected to each other.

“It was very intense,” Newhouse now says. “But I learned a lot about how to quickly make connections and how to determine and prioritize those connections for what you need in the moment.”

Making connections, and prioritizing them for the current moment, is precisely what led to Newhouse’s latest career step. A little over a year ago, Newhouse—the founder of cybersecurity firm Xtreme Solutions—met Isabelle Freidheim, the cofounder of Starwood VC and also Magnifi, a personal finance search engine, through the Women’s Presidents Organization. The two got to talking about what was then just the beginning of the SPAC boom, and together, they identified an opportunity.

“I took a good look around and saw that there were no women involved in SPACs,” Freidheim told Forbes in an exclusive interview. “What I saw that was very upsetting was history repeating itself: In the ’80s, there was a boom in leveraged buyouts. No women ever showed up. Or they showed up later, but it was too late to really claim a place of empowerment and decision making and access to favorable economics. And then same thing with the high yield boom. And then same thing with hedge funds.” (She’s correct: according to a 2020 analysis by employment specialist Fox & Partners, women comprise just 14% of partners at private equity firms and hedge funds.)

In my mind, from day one, I had to own this, because I know with the ownership comes a deep responsibility. Others are watching.

Athena CEO Phyllis Newhouse

And so, Freidheim and Newhouse founded Athena Technology Acquisition Corp, a $250 million blank-check company whose IPO on the New York Stock Exchange closes on Friday. While Athena is joining a fray of 528 active SPACs, only 17 of those—or 3.2%—has a female chair or CEO, according to SPAC Track. With Freidheim serving as Athena’s chair and Newhouse serving as its chief executive, Athena is also the only SPAC listed on the NYSE with a Black female CEO. (Ursula Burns, the former Xerox CEO, is listing a $300 million special acquisition company on the Nasdaq, but is the company’s chair.) And as such, Newhouse is entering rarified territory when, on Friday morning, she rings the New York Stock Exchange’s opening bell on the occasion of her company’s public listing.

“I think about the impact and responsibility that you have to be successful at this. You could be the first Black woman to lead a SPAC and it could flop, and it would be a disaster, or you could be responsible and own this,” Newhouse says, referring to herself. “So in my mind, from day one, I had to own this, because I know with the ownership comes a deep responsibility. Others are watching.”

Athena has not yet landed on its acquisition target (special acquisition companies have two years to identify and buy a target), but Freidheim and Newhouse are primarily looking within their respective industries—fintech and cybersecurity, along with direct-to-consumer—and plan to tap a powerful network of women to source deal flow.

Newhouse and Freidheim intend to leverage their connections within the Women’s Presidents Organization and also EY’s Entrepreneur of the Year, of which Newhouse was a recipient for her work building the Georgia-based Xtreme Solutions. Between the women involved in WPO and those involved with EOY, the duo has access to actual thousands of female founders and CEOs. “Most SPACs don’t have the opportunity to look at this particular pipeline of companies,” Newhouse says. “We think we have aligned ourselves strategically with partners where we could build a proprietary pipeline, and have access to all founders, but in particularly women founders that are not getting looked at for SPACs.”

Newhouse and Freidheim are not blind to the skepticism around the recent surge in SPACs. They know they’re joining some 400 other SPACs, according to SPAC Track, that are searching for an acquisition target; they know that the number of blank check IPOs in the first quarter of 2021—274—has already surpassed the 248 public listings in all of 2020. And they’ve seen the ups and the downs of the SPAC market so far—including, as Forbes reported in November, how median returns for SPACs six months after a deal is announced amount to losses north of 10%.

They think they can steer Athena away from a post-IPO dip by focusing on the sectors where there is the most opportunity—which is where their interest in cybersecurity comes in. “We’ve had a more than 6,000% increase in cyber attacks and then some very complicated vulnerabilities globally” during the pandemic, which has fueled cyber companies’ growth, Newhouse notes. (It’s a subject with which she’s intimately familiar, having established the Army’s Cyber Espionage Task Force before founding Xtreme Solutions in 2002.)

“Cybersecurity has $37 billion in unicorns that are ready to grow,” Freidheim adds. “It’s a sector that’s a little complicated to understand, but once a company that’s in cyber becomes public, there’s more visibility, there’s more transparency and it becomes easier to understand. So we see a good arbitrage opportunity where valuations can be lower in private markets and higher public markets.”

Playing a crucial role in executing this arbitrage will be Athena CFO Grace Vandecruze, the founder of Grace Global Capital, author of “Homeless to Millionaire” (during college, she commuted from a New York City shelter to Pace University), and an executive who has executed $25 billion worth of mergers, acquisitions and financing transactions throughout her career. Vandecruze has experiencing working and consulting in fintech and insurance technology, and expects to draw on both her sector expertise and industry connections to help Athena break through the SPAC noise.

“Our advisory team—and Isabelle, Phyllis, and myself—have built up a wealth and depth of relationships in a space that we can really leverage right now,” Vandecruze says. “And I do think that we are uniquely positioned in a crowded field right now.”

That unique positioning extends to Athena’s board of directors and advisors—all of whom happen to be female. Sitting on its board are former USA Network CEO Kay Koplovitz, ActOne Group founder Janice Howroyd, former Penn president Judith Rodin, and former SEC Commissioner Annette Nazareth. And its slate of investors include powerful women like Valerie Mosley, who sits on the boards of Draft Kings and Groupon; Nina Vaca, the CEO of Pinnacle Group; Alexandra Wilkis Wilson, the founder of Gilt Groupe, Glamsquad and new growth equity firm Clerisy; and Stacey Abrams. (Yes, that Stacey Abrams. As a trained tax attorney she’s long had an eye for business, and as the most prominent politician in Newhouse’s home state, is part of Newhouse’s wider circle of connections.)

While Freidheim and Newhouse hope to draw upon their advisors’ multifaceted backgrounds and expertises, it is also their goal to fuel an ecosystem of female investors, advisors and founders that can start changing the composition of the SPAC landscape.

“The idea was to make it so we could flood the market with women who have who have done it before and are second timers,” Freidheim says. “Everyone who’s in our group will become a second timer and become more valuable in the marketplace. It has ripple effects.”

“We have the power to change history, but you can only change it in the numbers,” Newhouse adds. “You can only change it when you leverage what everyone brings to the table. And this why it is so important to allow other people to sit at the table.”

Source: Forbes – Exclusive: Phyllis Newhouse And Isabelle Freidheim Are Busting Up The SPAC Boys’ Club By Bringing Athena To Market

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SPACS

Wall Street’s $100 Billion SPAC Boom Upends the League Tables

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  • Niche players like Cantor Fitzgerald soar in league tables
  • Citi jumps to No. 1 in IPO rankings as UBS drops out of top 10

The blank-check listings craze is shifting fortunes on Wall Street, knocking some of the world’s biggest banks off their perches and bringing unexpected bragging rights for others unaccustomed to competing for league table glory.

Cantor Fitzgerald LP, long one of the top SPAC underwriters, has been the biggest beneficiary of the boom and ended the first quarter as the No. 10 adviser on initial public offerings globally. The boutique, which hasn’t ranked that high for any full year in the past decade, got 99% of this year’s deal credit from blank-check work, data compiled by Bloomberg show. Without those deals, it would be 155 places lower.

Special purpose acquisition companies raised $100 billion in the opening three months, equivalent to more than two-thirds of the haul from all U.S. listings. That meant league table spots were heavily affected by a bank’s expertise in a once-niche part of the market that’s suddenly ballooned in popularity.

Citigroup Inc. jumped six spots in the rankings to become the busiest IPO arranger globally in the first quarter, thanks in part to its status as the No. 1 SPAC underwriter. Rival Bank of America Corp. rose nine places from this time last year to No. 6.

On the flip side, Switzerland’s UBS Group AG and four Asian investment banks — China International Capital Corp.Citic Securities Co.China Securities Co. and Sinolink Securities Co. — all dropped out of the top 10.

Global IPO Rankings

League tables shaken up by wave of blank-check listings

Source: Bloomberg
“Ranking Boost” compares current positions on IPO league table to ranking if blank-check companies weren’t counted. Last column measures percentage of deal credit coming from SPACs.

There was a chance to boast for firms further down the tables too. Though they still ended a way off the top, both Oppenheimer Holdings Inc. and BTIG LLC — niche players in the world of equity capital markets — saw their IPO rankings boosted by more than 100 spots thanks to roles on SPAC listings this year, the Bloomberg data show.

To be sure, investment banks that are too dependent on SPAC listings could be caught flat-footed when volumes dry up, and signs are already emerging that these deals won’t maintain their breakneck pace.

Turning Tide

Volume of new SPAC filings declines from record highs

Source: Bloomberg
Data for most recent week is through mid-day April 1.

Last week, blank-check companies filed plans to raise a combined $8.4 billion through U.S. IPOs, down 36% from the previous week. Their combined fundraising target, as well as the number of deals, both represented the lowest weekly tally since the end of January.

On Wednesday, for the first time in a long while, there weren’t any new SPACs that lodged registration documents. The brief drought marked a big change from recent months, when particularly prolific dealmakers were filing for three IPOs in a single day.

For now at least, some banks have something new to shout about with rivals and clients.

Source: Bloomberg – Wall Street’s $100 Billion SPAC Boom Upends the League Tables

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Equinox Group Draws SPAC Interest After $350 Million 2020 Loss

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  • Company fielding SPAC interest at at least $7 billion value
  • Earnings turned negative after gyms shut down during pandemic

Equinox Group is fielding interest from blank-check firms that would take the company public after it lost around $350 million last year amid the pandemic, according to people with knowledge of the matter.

Despite the loss, the gym chain has started to solicit interest from suitors including special purpose acquisition companies that value Equinox, including its SoulCycle entity and other brands, at $7 billion or more, said the people, who asked not to be named discussing private results.

Equinox Group’s consolidated revenue was around $650 million last year, the people said. Cash at gym unit Equinox Holdings was $50 million after the company paid down part of a revolving credit line, one of the people added.

Members were able to freeze or cancel their accounts when the spread of Covid-19 first shut gyms last year, pressuring the company’s financial results and forcing it to furlough thousands of workers.

A representative from Equinox didn’t respond to requests for comment. Sportico previously reported that the chain had received interest from SPACs and private equity firms.

The entire fitness industry is reeling from forced closures tied to the pandemic. Chains including Gold’s Gym International Inc., 24 Hour Fitness Worldwide Inc. and the owner of New York Sports Clubs sought bankruptcy protection last year.

Gyms have been allowed to reopen in many cities, though social distancing, cleaning guidelines and capacity limitations remain in place. Indoor fitness classes like SoulCycle recently started up again in New York, and the spin chain has also been offering outdoor classes in select locations. Equinox bought a majority stake in SoulCycle in 2011.

The company last year secured funding from private equity firm Silver Lake to build a digital platform, now known as Equinox+, and add as many as 50 locations annually.

Closely held Equinox received a minority investment in 2017 from L Catterton, a consumer-focused private equity firm, and is backed by principals of billionaire Stephen Ross’s Related Cos. Price quotes on the fitness company’s $1.02 billion loan due 2024 have hovered around 93 cents on the dollar.

Source: BloombergEquinox Group Draws SPAC Interest After $350 Million 2020 Loss

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Interest in SPACs—Special Purpose Acquisition Companies—is booming…and so is the risk of litigation.

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Following these ten steps will prepare SPAC boards, sponsors, and advisors for the likely shareholder suits and potential regulatory investigations that are increasingly becoming part of the SPAC landscape.

If 2020 was the “year of the SPAC,” 2021 may be the year of SPAC litigation. SPACs—Special Purpose Acquisition Companies—are publicly traded companies launched as vehicles to raise capital to acquire a target company. Often called blank-check companies, SPACs are companies in which shareholders buy shares without knowing which company the SPAC will target and acquire. Investors place their faith in the sponsor: the entity or management team that forms the SPAC. The SPAC generally has around twenty-four months to seek out and acquire a target, or else must liquidate and return the capital.

Hundreds of new SPACs were launched in 2020 alone. Booming M&A or other transactional activity in any sector can invite litigation driven by plaintiffs’ attorneys, and SPACs are no exception. In just the first three months of 2021, more than 40 suits targeting SPACs have been filed. The nature of these claims evidence growing sophistication, as lawyers used to challenging traditional M&A transactions begin to tailor their claims to the unique characteristics of the SPAC lifecycle. And with SPACs going mainstream—and attracting attention from outside the usual financial circles—regulators are closely examining transaction disclosures and other aspects of SPAC deals.

Preparing in advance—throughout the SPAC transaction cycle—for the prospect of litigation or regulatory scrutiny could make the difference between a quick resolution and an existential threat. Following these ten steps will provide SPACs, their boards, their sponsors, and their advisors the edge in future litigation or regulatory inquiries.

1. Document all board meetings in formal minutes—and make sure they are approved.

The typical public company has a corporate secretary who takes minutes at each board and committee meeting. The typical SPAC has no such employee and corporate housekeeping is sometimes delayed in the urgency to secure a binding acquisition transaction. Nevertheless, formal minutes, formally approved, are important and this detail should not be ignored or delayed unreasonably. Accurate, complete, contemporaneous, and board-approved minutes are important in demonstrating the board’s compliance with its fiduciary duty of due care. The absence of board minutes unfortunately can demonstrate the reverse.

2. Carve out time at each board meeting for private, executive sessions of independent directors—without the sponsor—and document in the minutes that these sessions occurred.

There have been persistent concerns about conflicts between SPAC sponsors and public investors. Plaintiffs’ attorneys are targeting these potential conflicts—arguing that sponsors have wielded their influence to push through deals on terms that favor their own interest in consummating a transaction within the required timeframe at the expense of other shareholders. To guard against the appearance that a SPAC board was captive to the sponsor, boards should reserve time for private deliberation by independent directors, free of the sponsor’s watchful eye, and board members should carefully evaluate the performance by sponsors.

3. Provide SPAC boards detailed due diligence reports before deal approval.

Rare is the SPAC litigation that does not claim the SPAC hastily agreed to a deal without adequate diligence. There are multiple ways to mitigate these claims—adopting exculpatory charter provisions can help—but there is no substitute for a well-informed board. Even if fulsome diligence, financial analyses or other assessments were performed, that information must be communicated to the board with adequate time for board review to put directors in the best position to argue that the transaction is the product of informed deliberation and that the board was afforded adequate time to review and sign off on the accuracy of the deal disclosures.

4. Make a record of looking for initial business combination opportunities.

The objectives of a SPAC are to identify a partner for an initial business combination and to complete that transaction. The sponsor should aggressively seek out these opportunities. The sponsor should also periodically inform the board of its efforts in this regard, and that should be reflected in the minutes. If an initial business combination is completed and the board is sued, it will be helpful if the minutes reflect efforts to identify a partner. The absence of that record could make it appear that what was being sought was any business combination, but not necessarily the best one.

5. The audit committee should scrutinize the target’s financials.

For the target company, the requisite disclosures that must be made to complete the de-SPAC transaction are more akin to an IPO than a typical acquisition by an existing, public operating company. Extensive, detailed audited financials are required, and the review of these disclosures by the SPAC board should be performed in consultation with competent advisors and/or delegated to the experts on the audit committee.

6. Consider obtaining a fairness opinion—and/or a formal presentation from the financial advisor.

Fairness opinions tend to be the province of target companies, not buyers. But the SPAC’s very existence centers around this acquisition, and a fairness opinion, like proper deal diligence, can bolster the board’s decision-making process—particularly if the target company has connections to the SPAC or the sponsor. Obtaining the opinion is not a mere box to check on the closing checklist.  Regardless of whether a fairness opinion is obtained, the board should consider whether a financial advisor presentation is desirable.

7. The merger proxy statement should be carefully prepared.

The merger proxy statement for the initial business combination should be as scrupulously prepared as an IPO prospectus. So, for example, if the target company relies heavily on one customer or supplier, or if major competition is expected to be faced, or if its products are relatively untested, it is not enough to mention that in boilerplate “risk factors.” And if potential business issues have been identified by consultants or in due diligence, those should be fully disclosed. Finally, it is often the case that forecasts will be included in the proxy statement for the business combination. Are those the only forecasts the SPAC has seen? If not, you should consider what you should do about the other set of forecasts.

8. All public statements should be closely scrutinized for accuracy—including social media posts.

Rule 10b-5 does not contain a social media exception. High-profile leaders of public companies are finding themselves on the receiving end of securities fraud claims and enforcement actions for statements made on Twitter and other platforms. SPAC boards should have policies in place to guard against these missteps, which should include a process to review, identify and correct potentially misleading claims or risky puffery.

9. Beware the late-stage deal.

The appearance of potential conflicts between SPAC sponsors and ordinary shareholders approaches its zenith as the deadline for liquidation looms. SPAC leadership should be aware that multiple suits have been filed against SPACs that embraced a deal target at the eleventh hour, claiming that the SPAC sponsors and boards put their interest in closing a deal ahead of the SPAC and its investors.

10. Disclose, disclose, disclose.

Plaintiffs’ lawyers use the SEC’s guidance on disclosure considerations for SPACs like a playbook. SPAC boards should carefully review disclosures that touch on the topics flagged by the SEC, particularly disclosures relating to conflicts (such as interlocks between the sponsor, the SPAC, and the target; the liquidation timeline; and underwriting fee structures) and details about how the SPAC board settled on the acquisition target.

Source: JDSupra/Cadwalader, Wickersham & Taft – Interest in SPACs—Special Purpose Acquisition Companies—is booming…and so is the risk of litigation.

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The ‘March SPACness’ Final Four Is Set: Are These The Best Former SPACs

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On “SPACs Attack,” the latest SPAC mergers, rumors and headline news is broken down Monday through Friday.

To coincide with the 2021 March Madness Tournament, “SPACs Attack” held a March SPACness Tournament featuring a bracket of 64 companies that have completed the SPAC process and are now publicly traded companies.

The winner of each round was decided by the live audience on YouTube based on which company would have the highest percentage increase from March 16, 2021, through the end of the year.

A Final Four has been set and features the following former SPACs.

Romeo Power: Battery maker Romeo Power Inc RMO 0.6% emerged into the Final Four with a narrow victory over online sports betting and iGaming operator Rush Street Interactive RSI 0.3%.

Romeo Power shares traded for over $40 back in December and have fallen since completing the merger.

The company reported earnings on Tuesday with fiscal 2020 revenue of $9 million, which was lower than the $11 million listed in the company’s investor presentation.

Guidance from the company of $18 million to $40 million for fiscal 2021 was significantly lower than the $140 million projected by the company at the time of the SPAC deal announcement. Supply chain issues were listed as an explanation for the lowered guidance.

Desktop Metal: 3D printing stock Desktop Metal Inc DM 3.16% grabbed a spot in the Final Four with a win over online home buying and selling company Opendoor Technologies Inc OPEN 2.64%.

Desktop Metal is a large player in additive manufacturing seeking to power the next industrial revolution printing items for large customers. The company also recently expanded through acquisitions and the launch of a healthcare division.

DraftKings: Online sports betting and iGaming company DraftKings Inc DKNG 2.53% landed a spot in the Final Four with a victory over rare earth mining company MP Materials Corp MP 2.15%.

DraftKings has a presence in more states than any other competitor in the online sports betting space. The company continues to be viewed as a leader in the space and analysts have raised projections for revenue, market share and the iGaming opportunity for the company.

Butterfly Network: Rounding out the Final Four is Butterfly Network Inc BFLY 3.21%, a portable ultrasound company backed by Bill Gates. The company beat out Skillz SKLZ 1.26% in a close Elite Eight battle.

Butterfly Networks has been a favorite of Cathie Woods with the Ark Genomic Revolution ETF (BATS: ARKG) taking a position shortly after the deal was announced.

The company is seen as a long-term winner in the emerging health market with a device that could help hospitals with costs and expand ultrasound availability in emerging markets.

What’s Next: Romeo Power will battle Desktop Metal for a spot in the championship, while DraftKings battles Butterfly Network.

To see who wins and makes it to the championship, tune into “SPACs Attack” next week and vote for your favorite in the chat.

Source: Benzinga – The ‘March SPACness’ Final Four Is Set: Are These The Best Former SPACs?

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