How Special Purpose Acquisition Companies Affect the Media Industry

Special Purpose Acquisition Companies – also known as SPACs – have been seen as something of an upgrade from traditional IPO investing lately. The vehicle has been a specific target from media industry entities, but there still seems to be caution about its viability.

To better describe a SPAC, it is a publicly traded investment vehicle, also known as a blank check company. Its purpose is to raise funds to ultimately buy existing businesses. Similar to the concept around crypto, it allows general investors to get into a potentially high-growth business early, and also carries the risk of losing money in poorly performing SPACs. Vehicles are usually led by an outstanding person who can tap public trust and attract investors.

SPACs have been somewhat of an enigma thus far with many stories of growth and also calamity.

Investor and corporate adviser Michael Streets, who has just acted as financier for €43 million Parisian listing CMG Cleantech, said of the trend: “Most people know that investing is always risky, however I think with SPACs people need to be even more savvy. You can’t just look at the name and then think everything will be fine. Look at the plan, look at the thought process, and if you don’t feel comfortable or you’re not in the most comfortable situation perhaps financially, you should seriously consider whether or not to get involved.

In 2021, former WarnerMedia Europe President Iris Knobloch left the company after 25 years to start a SPAC named I2PO. The $300 million investment vehicle was launched via Euronext Paris and was backed by French billionaire Francois-Henri Pinault’s Artemis.

Knobloch said when announcing the company last year: “Europe is home to many strong companies with great potential in this sector, which, thanks to the influx of capital, resources and expertise by I2PO, will have the support needed to take their business to the next level,”

“I see a huge opportunity to consolidate a fragmented market and go beyond Europe to other markets.”

The first movement of SPACs was confirmed this year. To bring the French music streaming platform, Deezer, to a valuation of 1.1 billion dollars. The goal is to capitalize on the growing music streaming market and pursue multiple markets globally through new investment and growth.

On the other side, however, Buzzfeed went public late last year through a SPAC merger, but its earnings report and performance fell short of what investors were told. Leading to pressure from said investors to make drastic changes to the organization, including cuts to the press team.

Indian media mogul, Shibasish Sarkar, the former CEO of Reliance Entertainment also left the company to start his own SPAC last year called International Media Acquisition Corp.

Focused on the media entertainment business, the company made a $230 million IPO on the Nasdaq in August. SPAC aims to become a media conglomerate, owning domains in multiple pipelines within the media and entertainment space, commanding a good chunk of the industry in India.

Retired basketball player Shaquille O’Neal also launched a SPAC – called Forest Road Acquisition Corp II – alongside two former Disney executives, Kevin Mayer and Tom Staggs, in March last year. Although they raised $350 million and took on two fitness entities, The Beachbody Company and Myx Fitness Holdings, they have since lost 80% in value.

Streets continued: “Most of the 2020 SPACs were mangled this year because they didn’t have a clear vision of the company they would merge with, the competitive advantage they would have once the deal was done. and their investment conditions forced them to buy overpriced companies. or lose their money. This year, the market has punished speculation and only companies with cash and competitive advantages will survive.

Even with many cautionary examples, the SPAC trend appears to be continuing. Several companies from different industries – such as social media entity OnlyFans – circle the possibilities and plot for the best time to launch. SPACs certainly don’t seem like a sure thing, but they seem to have their uses for now.