A special-purpose acquisition company (SPAC) is a shell company that raises money by going public in order to acquire a private company, effectively taking the private company public. 2020 has seen SPACs rise in popularity because they are a faster route for companies to access the public markets and have seen strong investor demand.
Having successfully raised capital with three prior SPACs and closed deals for two of them, Churchill Capital has recently filed the paperwork for its fourth SPAC. It will be called Churchill Capital IV and will trade under the ticker CCIV once it goes public. This SPAC has an ambitious plan to raise $1 billion that it can use to acquire a private company.
Churchill Capital's SPAC franchise
Having successfully raised funding for three prior SPACs, Churchill Capital IV will have something that can give investors confidence: a track record.
Churchill's first SPAC raised $690 million and acquired Clarivate PLC in May 2019. Clarivate is an information and analytics company that helps commercialize scientific research. Since going public through the Churchill SPAC, its stock has more than doubled from its initial price of $10 per share -- a great outcome for the SPAC's early investors.
The third Churchill SPAC, Churchill Capital Corp. III (CCXX.U), recently announced a deal to acquire MultiPlan for $11 billion -- making it the largest SPAC acquisition ever proposed. MultiPlan is an analytics company that helps health insurance companies manage the cost of care. Churchill Capital II raised $1 billion -- the same amount proposed for the latest Churchill SPAC -- but managed to acquire a company more than 10 times the size of the initial capital it raised by issuing more equity and taking on debt.
Churchill's second SPAC, Churchill Capital Corp. II (NYSE: CCX), raised $600 million. This SPAC is still searching for a company to acquire, which is interesting, because it IPO'ed before Churchill III.
The latest $1 billion SPAC
Churchill's fourth SPAC plans to raise $1 billion and to go public soon. Once public, it will have 24 months to find a company to acquire. If it doesn't complete an acquisition by the deadline, it will give investors back their money plus interest and minus any professional fees incurred along the way. These terms are fairly standard in comparison to those of other SPACs.
Like the SPACs before it, Churchill Capital Corp. IV will be open to acquiring a business in any industry that highlights the management team's experience. In its IPO prospectus, the SPAC noted that it would like to acquire a company that it can grow through additional add-on acquisition. Given the buys made by Churchill I and Churchill III, it is also likely that Churchill IV will target a data analytics or technology-enabled company.
Michael Klein is the founder and key decision maker of all the Churchill Capital SPACs, including Churchill Capital IV. Klein is a seasoned deal maker. He currently runs his own investment bank, called M. Klein, and previously was the head of investment banking at Citibank. With more than 30 years of experience in capital markets, he is extremely well prepared to identify and negotiate a good deal for the SPACs he has created.
SPACs rising in popularity
2020 has been the year of the SPAC, with more than 40 of them going public and raising a total of more than $14 billion. Many high-profile companies have recently gone public via SPAC, including Virgin Galactic, DraftKings, and Nikola Motors. The success of these offerings has given legitimacy to the SPAC structure and increased demand from investors.