Special Purpose Acquisition Companies (SPACs) are the flavor of the year on Wall Street, following big high-profile SPAC-fueled IPOs like DraftKings (DKNG) and Virgin Galactic (SPCE), and we’re seeing a bunch of newsletters and financial pundits try to leverage that popularity… the latest is Enrique Abeyta, who is launching a SPAC-focused newsletter on Thursday for Empire Financial Research (title and price unknown at this point, the pitch for the event is here if you’re curious).
And they also hint at the deal that Abeyta is going to highlight for this launch, so shall we try to ID it for you?
OK, you got it. I can’t resist solving a puzzle. Here’s how it’s pitched in the teaser for the event:
“On October 8th, we’re airing the deal of a lifetime.
“It’s called a ‘SPAC’… A type of deal you’ve probably never seen before.
“A chance to invest in what could soon become the most exciting new company in America… essentially BEFORE it goes public. Like a Pre-IPO, but even better.”
OK, SPACs are surely exciting for investors these days… but there have also already been more than 100 new SPACs that have launched just this year, so which SPAC is it?
“The man behind the SPAC we’re sharing on October 8th is one of the most connected dealmakers in Hollywood. He’s worked with Tom Cruise… Sylvester Stallone… and helped relaunch the James Bond franchise…”
OK, so given the relatively small world of SPAC sponsors that’s probably enough… but let’s just make sure by checking the other clues…
“The last time he launched a deal like this (in 2019), you could have quadrupled your money in just 6 months!”
So that confirms we’re being teased about a SPAC sponsor who has done this before. Other hints?
“He’s the former CEO of the studio that produced The Wizard of Oz! His business partner is a former co-president of Sony Entertainment.”
And that’s about it. Ready for the Thinkolator? It takes but a few minutes to pour in those few cups worth of clues and get the Thinkolator chugging, and only a couple seconds of actual work to get our answer: This is Flying Eagle Acquisition Corp (FEAC).
Flying Eagle Acquisition Corp. is the sixth SPAC that has been launched by Jeff Sagansky and Harry Sloan, who are almost certainly the two Hollywood dealmakers teased by Abeyta, so it has gotten a fair amount of attention — these guys aren’t rookies, and, in a world where your latest hit is all anyone cares about, they’re also riding pretty high on their last deal right now… their fifth SPAC, launched about a year before this one, in the Spring of 2019, ended up making a deal to take DraftKings public. That was Diamond Eagle Acquisition (DEAC), which became DraftKings (DKNG) after the merger was completed, and is now widely seen as the most successful of the recent crop of SPAC mergers (more on that in a moment).
Will Flying Eagle’s next deal become another DraftKings, Nikola, Hyllion or Virgin Galactic? Or will it falter like many lesser-known SPAC deals have done in the past? That depends entirely on what kind of deal Sloan and Sagansky have come up with this time, and, at least in the short term, on whether that idea catches fire with investors… and that deal has been announced, so what is it?
Flying Eagle will be merging with Skillz to take that mobile gaming company public, and if we assume the deal is approved by all parties (it probably will be, the share price is signaling no trepidation on that front), then the combined public company will issue a lot more shares to current Skillz (private) shareholders and new institutional investors (at $10 per share), and be renamed Skillz, with the new ticker SKLZ, with supervoting shares meaning that Skillz leadership will maintain voting control of the company. The deal will probably be completed before the end of 2020, assuming no surprises, but I don’t know if the actual FEAC shareholder vote has been scheduled yet.