Boston Omaha's SPAC Is Taking This Infrastructure Company Public

Young conglomerate Boston Omaha (BOC -0.26%) got in on the special purpose acquisition company boom last year by sponsoring its own blank-check company, Yellowstone Acquisition Company (YSAC). We recently learned that Yellowstone plans to take aviation infrastructure company Sky Harbour public, so in this Fool Live video clip, recorded on Aug. 2, Fool.com contributor Matt Frankel, CFP, and Industry Focus host Jason Moser discuss the deal and what we know about Sky Harbour so far. 

Matt Frankel: One of our favorite companies, Boston Omaha. You know Boston Omaha?

Jason Moser: Oh, yeah.

Frankel: They sponsored a SPAC called Yellowstone Acquisition. I'll give you 10 seconds to make a joke about the TV show.

Moser: Well, no. I'm not making jokes about that show. It's great. But this is one you've talked about before though on this show I think. I remember you speaking about Yellowstone before.

Frankel: I'm equally excited as a Boston Omaha investor as I am as a Yellowstone investor, because Boston Omaha was pretty much the only way that everyday investors could get on the sponsorship side of the SPAC game. Everyone can buy shares like Chamath [Palihapitiya]'s SPACs or any of the other 500 or whatever SPACs in the market. But you couldn't be a SPAC sponsor. The economics of SPACs really favor the sponsors so I'm really thrilled to see this. Boston Omaha is my third-largest stock position, so I'm very happy to see this from that point of view. Yellowstone announced that they are merging with a company called Sky Harbour. They are a company that builds out private aviation hangar campuses. Essentially, they give rich people places to park their jets.

Moser: How big of a market opportunity is that, Matt?

Frankel: My colleague Dan Caplinger and I were talking about it this morning. I asked him because I know he's a private aviation guy. He has a small plane that he flies around up the Northeast. He said this is a big market opportunity, he said most hangers are really not built to any sort of building code. It's nothing but a pre-fab metal building that quite frankly, people don't want to park their private jets in. He said if you fly into one of these nice airports, which I'll get to the airports they target in a second, it could be really hard, really expensive to find private space to put your plane.

They are operational in the Sugar Land Airport in Houston, which he said is a big private aviation hub. They are under construction in Miami area airport and the Nashville International Airport, which are big private aviation terminals as well. Entered into lease agreements in a Denver area airport, which is like the Aspen Gateway, he says, and one in Phoenix. They're building these private hangar campuses, which are really interesting from a real estate perspective. I'm curious to see how this is going to translate into actual profits. They haven't released anything in terms of revenue yet. The press release says that an investor presentation and a full SEC filing are about to be published. They have not been published as of this recording, by the time you're listening to this, it might have been, but we don't have too many details about the business. But here's just the economics of it. The valuation of this company is by far the lowest of the three I'm talking about, $777 million valuation in the SPAC merger. That includes $238 million of cash they're getting. Very low valuation. This is a micro-cap business. $138 million is coming from the SPAC. Boston Omaha is putting another $55 million of its own cash in, $45 million guaranteed backstop. If they can't raise any extra money, they're going to put another $45 million in.

There's no PIPE announced yet, which is a unique part of the SPAC deal. They're planning on trying to raise an additional PIPE, but that's not a condition of this deal going through, which in a lot of SPACs, that's a big deal. We talked about the PIPE around with pretty much all of these. They also plan to complete at least $80 million bond offering in September to raise some additional money. From what Dan tells me that this is a really cost-prohibitive business, and they're raising all this capital to be able to finance it in a very attractive way that no one else will be able to match. I love this investment for Boston Omaha because it's right up their alley. They love infrastructure investments, first of all. They're building out rural broadband and things like that. They wanted something that is in their wheelhouse, which definitely is but doesn't overlap any of their current business lines, which this doesn't, so I really like this. On the surface, I want to see some more numbers before I really give my stamp of approval. But this seems like exactly what they were looking for when they launched Yellowstone. I like this one and I'm sure a lot of investors will as well. I think it's a really interesting business and I'm curious to hear more.