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Forget About CIIG Merger and Consider These 3 SPACs Instead

CIIG Merger (NASDAQ:CIIC) went public in December 2019, raising $225 million. The special purpose acquisition company (SPAC) found a target in Arrival, the UK electric vehicle (EV) company, within 11 months of its initial public offering. Since then, CIIC stock is up 170% through Jan. 28. 

two businessmen shaking hands with peers at their side
Source: Shutterstock

Arrival is one of many EV startups to find a SPAC suitor to go public in recent years. 

The last time I wrote about CIIC stock in early January, I suggested that aggressive investors might buy in the low $20s or high teens. Those who bought SPAC units for $10 in CIIG Merger’s SPAC IPO ought to book profits.

EV companies of every kind attracted attention in 2020 and will continue to do so in 2021. Valuations have gotten stretched.

Meanwhile, if you want to get more value for your money, these three SPACs all went public around the same time as CIIC in Q4 2019.

Buy This Instead of CIIC Stock

On Nov. 07, 2019, LGL Systems Acquisition Corp. (NYSE:DFNS) sold 15 million units at $10. The intended target is a company in the aerospace, defense and communications industries with an enterprise value between $350 million and $1 billion. 

No multi-billion-dollar over-the-top acquisition for these folks. 

And who are the people behind DFNS?

Marc Gabelli, the president of GGCP Inc., the parent company of Gamco Investors. His dad, Mario Gabelli, founded Gamco in 1976. Marc Gabelli’s been president since 1999. Rob LaPenta and John Mega were executives at L3 Technologies, a leading aerospace and defense company that’s now L3Harris Technologies (NYSE:LHX).

The sponsors feel that opportunities abound in the defense industry. I’m inclined to agree. Never has the U.S. been so vulnerable to external and internal threats.

“Our objective is to acquire a target that will be a platform for future add on acquisitions with the goal of becoming an integrated provider offering a broad range of products or services across the aerospace, defense, and communication end markets,” LGL Systems’ website states.

“We intend to focus on target businesses that offer differentiated products and services for defense and commercial applications, including highly-engineered systems and subsystems, services, technologies and applications directed towards the DoD, other U.S. government agencies, allied foreign governments and NATO.”

Trading just 50 cents about its IPO price, it won’t take much to move it higher. 

The Son of a SPAC Man

Daniel J. Hennessy is the chief executive officer of Hennessy Capital, an alternative investment firm founded in 2013. However, it is Hennessy’s work with SPACs that likely raised his profile in recent years. 

Hennessy Capital has done five SPACs to date, raising $1.2 billion in the process. Four out of five of the SPACs have found targets. Hennessy’s fourth offering, which raised $300 million, is now known as Canoo (NASDAQ:GOEV), the EV startup utilizing a skateboard platform for its vehicle design. 

Anyway, I mentioned all of this to say that Hennessey’s son, Thomas D. Hennessy, whose regular job is managing partner of Hennessy Capital’s real estate strategies, launched his own SPAC in November 2019. It raised $150 million. His dad served as an advisor.

At the end of July 2020, PropTech Acquisition announced that it would merge with Seattle-based Porch Group (NASDAQ:PRCH), a company that connects consumers with service providers such as plumbers and movers and other home-related jobs and collects a fee for its matchmaking.

The merger was completed on Dec. 23, 2020. 

In 2019, Porch had revenue of $57 million, 58% higher than a year earlier. In 2020, it projected revenue of $73 million. However, the business has been much stronger than originally anticipated. 

CEO Matt Ehrlichman appeared on CNBC on Jan. 15. He outlined the company’s growth plans, including several acquisitions for $122 million, increasing its total addressable market to $320 billion, 45% higher than its previous estimate before the latest moves. 

The company expects 2021 revenue of $170 million, 134% higher than in 2020. On an adjusted EBITDA basis, it projects a $7 million profit in 2021.

Trading under $15 as I write this, I could see $20 or higher by the end of this year.  

A Rollup Like No Other

On Nov. 7, 2019, Juniper Industrial Holdings (NYSE:JIH) raised $300 million from its SPAC IPO. It focused its search on targets operating within the industrial sector with an enterprise value between $1 billion and $2 billion. 

The people behind Juniper have significant managerial experience in both the industrial sector and with mergers and acquisitions. 

On Dec. 22, 2020, it announced its merger with Janus International Group, a Georgia-based manufacturer of self-storage and commercial industrial doors and facility automation solutions. 

The enterprise value of the combination is $1.9 billion. The transaction includes $348 million in cash from Juniper’s trust account and $250 million in private investment in public equity (PIPE) from institutional investors such as Baron Capital and Fidelity. 

Janus’ 2021 projected revenue is $622 million with $162 million in adjusted EBITDA. 

The company’s grown its revenue by more than 20% annually since 2010. It has more than 10,000 customers and 50%+ of the institutional market for building product solutions. It converts approximately 95% of its adjusted EBITDA into free cash flow.

Janus shareholders will own 51% of the business, Juniper shareholders (26%), PIPE shareholders (18%), and the Juniper sponsors (5%). 

It’s refreshing to learn about a SPAC combination with a business with real revenues and profits and not just a dream and a prayer. 

Given self-storage is unlikely to ever go out of style, I like its prospects. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.


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