The April 2021 SEC announcement that SPACs treat warrants as liabilities rather than equity has substantially slowed the pace of SPAC issuances in the second quarter of 2021. We believe this latest SEC announcement is a healthy correction that will improve overall performance of SPACs and filter out poor sponsors just as other SEC guidance and rule changes have in the past. We believe that the SEC, in lockstep with other federal institutions, values the SPAC process and the liquidity that SPACs have brought to the public market and showed good judgement to cool the market down in the short term.  

We created our SPAC Fund believing that SPACs are an efficient tool to put equity on company balance sheets and that backing first-class CEOs with meaningful operating experience is the best pathway to SPAC success. We are aligned with underwriters who have come to believe that the SPAC process has too often been misused as a substitute for VC fundraising and that the SPAC approach should be limited to acquisitions of companies that are ready to become public. This philosophy is consistent with Navigation Capital’s approach and is demonstrated throughout our portfolio and committed SPAC pipeline.   

We expect SPACs to remain attractive for high-growth companies as an efficient pathway to the public markets, and that there will continue to be a place for SPAC transactions in the future. Even now, SPAC deals continue to get done, with Goldman Sachs-backed Big Sky Growth Partners pricing at $300 million in early May and Bill Gates-backed Ginkgo Bioworks announcing a $15 billion merger with Soaring Eagle Acquisition Corp in mid-May. Both SPACs are led by experienced operators: Big Sky by Mark Vadon (co-founder of both Zulily and Blue Nile and former board chairman of Chewy) and Soaring Eagle by serial SPAC sponsor and former MGM CEO Harry Sloan.