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SPACs Moving into the Mainstream
Traders Magazine Online News, May 16, 2008
The space for special purpose acquisition companies--or SPACs--continues its dramatic transformation. Earlier this week, the SPAC Heckmann Corporation announced it would move its listing from the American Stock Exchange to the New York Stock Exchange.
Heckmann Corporation expects the SPAC's components--common stock, units and warrants--to begin trading on the NYSE on May 23, the firm announced in a news release. Until the move, the SPAC will continue to trade on the Amex.
The move marks the first time the world's largest exchange will list a SPAC in the U.S. It also adds another degree of legitimacy to a heretofore little-known space on Wall Street, SPAC traders say.
And that should continue to change, says Sean Gambino, a managing director and head of trading with Legend Merchant Group, which lists and trades SPACs. "I think it's a great deal; it's very big," he says. "It further legitimizes SPACs as a viable asset class and not a one-off product."
The move should increase SPACs' profile because the NYSE audience is that much greater than the Amex's, Gambino adds. SPACs have long traded on the bulletin board, as well.
SPACs are investment vehicles that until recently had dubious reputations and were listed and traded exclusively on the bulletin board. Essentially, they are shell companies that raise money through IPO offerings. The management of a SPAC, in turn, then has up to two years to use the proceeds from the IPO held in escrow to purchase companies with an operating history.
Large investment banks have been ratcheting up their interest in these "blank check" companies over the past few years and have started raising vast sums for their IPOs. And more desks have opened in the last year to trade them.
The Big Board said it would start to list SPACs in the U.S. because the securities fit better with the NYSE's stringent listing standards, according to Robin Weiss, senior vice president at the NYSE in investment banking services.
"We studied the situation over time and saw that the deal technology changed significantly for us to feel confident that certain investor protections were in place for the new structures," she says. "In addition, the quality of the sponsors and the quality of the underwriters gave us optimism about the solidity of these new tools."
The NYSE already lists two SPACs on NYSE Euronext's Amsterdam market.
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