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The Newest $325 Million Sports-Related SPAC
Tom Ricketts, Executive Chairman of the Chicago Cubs, and The Raine Group have teamed up to launch a $325 million SPAC — but what will they acquire?
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Friends,
Here’s a mind-blowing stat:
In 2020, we will likely see more companies go public via SPAC than IPO.
Even more interesting, the trend doesn’t appear to be slowing down anytime soon.
What am I talking about?
The Raine Group, an investment advisory group focused exclusively on technology, media and telecommunications (TMT), and Marquee, a business entity run by Cubs executive chairman Tom Ricketts, announced the formation of “Marquee Raine Acquisition Corp” on Friday — a $325 million special purpose acquisition company (Source).
Before we get into the details, what exactly is a SPAC?
Here’s a brief primer I wrote in August:
SPACs are commonly referred to as blank check companies because they raise a blind pool of capital through an equity offering.
Investors commit a specified amount of capital for up to two years, during which the SPAC sponsor will identify, vet, and finalize a transaction with a target acquisition. If the deal is finalized and approved by all shareholders, the acquired company is now a publicly traded firm without having to pursue the traditional IPO process.
There is a catch though.
Investors have the right to veto any proposed transaction and they can take back their money if they don't like the acquisition target once it is identified.
With the IPO market experiencing COVID-19 related volatility, SPAC’s have become more popular as a backdoor way for target firms to become publicly listed.
And for those of you that are visual learners, here’s a simple infographic:
Furthermore, this chart should give you an idea of how popular SPAC’s have become in 2020.
As for the SPAC participants…
While The Raine Group has advised and invested in over 180 transactions totaling $380 billion over the last 5 years, including businesses like Uber, Spotify, and Blade, they also have a significant presence in sports.
Here are a few highlights (Source):
The Raine Group led DraftKings Series C Funding Round in 2014 and “has provided strategic advice to DraftKings on multiple occasions, including in its role as exclusive financial advisor on the $3.3 billion three-way merger with SBTech Malta Limited and Diamond Eagle Acquisition Corp. (“Diamond Eagle”), a SPAC, in 2020.”
The Raine Group served as exclusive advisor to Accel Entertainment, the largest distributed video gaming terminal operator in the United States, during their SPAC merger with TPG Pace Holdings Corp. in 2019 — a deal valued at ~$884 million.
From a non-SPAC specific standpoint, The Raine Group is currently involved in the sale of the Minnesota Timberwolves, advised Steve Ballmer on his acquisition of the Los Angeles Clippers, and served as advisor for league formation and fundraising of the Premier Lacrosse League (PLL) and the XFL.
Marquee, not to be outdone by The Raine Group’s experience, is a business entity run by Cubs executive chairman Tom Ricketts — whose family purchased a controlling interest in the Chicago Cubs from Tribune Media in 2009 for $845 million.
Since purchasing the Chicago Cubs in 2009, Tom Ricketts and his family have strategically implemented changes that have increased the team valuation from $845 million to $3.2 billion.
Here’s how they did it (Source):
Completed a privately financed five-year, $750 million historic restoration of Wrigley Field that updated player facilities, introduced premium hospitality, and increased sponsorship assets.
Founded Marquee Sports network, a single-team regional sports network, to maximize the value of the organization’s media rights and grow the Cubs brand.
Overhauled the Cubs infrastructure, including the introduction of data analytics and sports science & human behavioral coaching, which ended the Chicago Cubs 100-year World Series Championship drought.
Built a $99 million West Coast headquarters in Mesa, Arizona anchored by Sloan Park, a 15,000-seat stadium recognized as one of Major League Baseball’s premier spring training facilities.
Acquired 11 rooftop properties adjacent to Wrigley Field through 6 M&A transactions.
Gained sports betting exposure through an equity investment in The Action Network and a long-term partnership with DraftKings as the Cubs’ official sports betting partner.
Combining a premier investment advisory firm with one of the top executives in baseball, now that’s exciting.
Now that we’ve properly vetted the sponsors, what could The Raine Group and Tom Ricketts be interested in acquiring?
Well, it’s not exactly clear yet.
In case you forgot, SPACs can’t have an identified acquisition target ahead of time.
Rather, they typically identify preferred sectors while still reserving the right to invest in any area they see fit.
As for “Marquee Raine Acquisition Corp,” their prospectus lists eight potential sectors of interest (Source):
Interactive Entertainment and Games
Real Money Gaming
Digital Media and Entertainment
Sports and Sports-Enabled Assets
Health, Fitness and Wellness
Out-of-Home and Live Entertainment
Audio Content and Podcasting
Technology
While they covered essentially ever macro-related sector known to sports, I’d place my acquisition bet on one of the following:
Professional Sports Team
Gambling & Daily Fantasy Sports Company
Digital Media Asset
Why?
Because when it comes to The Raine Group and Tom Ricketts, that’s where their tangible experience lies.
Identifying a target company isn’t necessarily hard though, convincing them to go public is. Historically, professional sports franchises and related assets have been hesitate to go public given the additional regulatory requirements, enhanced financial and operational transparency, and volatility related to valuation.
Special Purpose Acquisition Companies definitely help with some of those concerns, and firms like DraftKings have thrived after going public via blank check company, but with billions of dollars currently waiting to be deployed through registered sports-related SPACs — at what point does the supply & demand curve start to fundamentally shift?
We’re probably still a ways away from that happening, but it’s certainly worth keeping an eye on.
P.S. Most of this info was pulled directly from their prospectus, which you can check out here.
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