Entertainment finance firm Forest Road and a team of A-list media insiders from Tom Staggs to Kevin Mayer have closed a $300 million IPO of a new SPAC – a special purpose acquisition vehicle they’ll use to buy a private company in media, tech or telecom.
SPACs, which are exploding, are basically empty publicly traded vessels with investors and, in this case, seasoned managers, that go public and find private companies to merge with – taking them public in turn in a process that’s faster, easier and cheaper than a traditional initial public offering. Ideally the SPACs offer industry expertise in the transition to public company status and beyond.
Units of the Forest Road SPAC now trade on the New York Stock Exchange under the ticker symbol FRX and can start to approach merger candidates to discuss deals. Forest Road chief executive Zachary Tarica, who is also chairman and chief investment officer of the SPAC, told Deadline it’s been contacted by north of 50 companies since announcing launch plans in October. It would have its own list of candidates to reach out to as well.
SPACs, also called “blank check” companies, have two years to complete an acquisition. The clock started ticking this morning for Forest Road, but Tarica said it probably won’t take that long. Targets can be independent and privately owned or part of a larger company looking to shed assets.
Tarica knows he’s competing in a increasingly competitive field with the U.S. in the midst of a SPAC bubble. In the third quarter alone some 77 SPACs went public, representing 47% of all IPOs for the three months, according to financial data firm FactSet. There are hundreds of SPACs out there kicking the tires of potential targets.
“The pendulum in the amount of SPAC issuers has gone so high that if you are not a great team, if you cannot court a company and show exactly how to add value, there are too many out there,” Tarica said. SPAC’s need to be “differentiated,” like his is, he says, able to “pitch a management team and speak to founders about what they could or should be doing.”
Forest Road’s SPAC is led by former Elliott Management CEO Keith Horn as chief executive. Former top Walt Disney executive Tom Staggs is chair of the Strategic Advisory Committee. Kevin Mayer, formerly of TikTok and Disney, is a strategic advisor, along with Shaquille O’Neal and producer Mark Burg. Salil Mehta, also a veteran of Disney as well as 20th Century Fox and NBCUniversal, is CFO. Independent directors include Peter Schlessel, former CEO of Focus Features; Sheila Stamps, former commissioner and Audit Committee chair for the board of the New York State Insurance Fund, the state’s largest worker’s compensation insurance provider; Teresa Miles Walsh, CEO of consultancy Access Media Advisory; and Martin Luther King III. A number of the execs were already on the board of Forest Road, which specializes in tax credit lending for producers and entertainment companies (as well as the real estate and renewable energy sectors).
SPACs can target any sector and entertainment has its fair share. Last week, Cindy Holland, who departed Netflix recently after an 18-year run, this year, joined the board of a new SPAC, Horizon Acquisition Corp II.
John Malone recently filed to create the Liberty Media Acquisition Corporation SPAC. Media and entertainment execs Harry Sloane and Jeff Sagansky have launched a series of SPACs in recent years including the Diamond Eagle and Flying Eagle Acquisition Corps. Flying Eagle acquired mobile gaming platform Skillz and will be taking it public. Diamond Eagle merged with DraftKings, creating the only pure-play sports betting company. Playboy will be going public again after merging with the Mountain Crest Acquisition Corp. SPAC.
Gerry Cardinale’s RedBird Capital is launching a SPAC called RedBall Acquisition to target sports media properties including data analytics companies or possibly a sports franchise. Former House Speaker Paul Ryan is chairman of an SPAC he created called Executive Network Partnering Corp.
Northern Star Acquisition Corp. CEO and former Hearst executive Joanna Coles, in a session called “SPAC is the New Black” at a conference put on by The Information earlier this month, is looking for companies in the online health and beauty space.
SPACs aren’t new but are newly popular. There used to be a bit of a stigma on companies not taking the traditional IPO route to the public market. But Covid-19 has eroded the finances of many firms, creating opportunities for SPAC sponsors. With markets so volatile this year, many investors have stayed on the sidelines and have cash to burn, helping fund the SPAC frenzy.
And for private companies, beyond the cost and time, going public can be immensely stressful. Imagine, “If you were a company contemplating going public in the last four years and it was all done, all led to this moment of the IPO, and the day of your IPO the whole enterprise value of the business is predicated on Donald Trump’s tweet that morning,” noted one Wall Streeter.