Alternative Initial Public Offering Models (eBook)

Cover 1
Acknowledgements 6
Summary of Contents 8
Contents 10
List of Tables 14
List of Figures 15
List of Abbreviations 16
Introduction?????????????????????????????????????? 22
Outline 22
Research Topic and Aim 22
Course of Study 23
Chapter 1: Background Information on SPAC Shells?????????????????????????????????????????????????????????????????????????????????????????????????????????????? 24
I. Historical Development of SPACs in US and European Capital Markets 24
II. Fraudulent Blank Cheque Company Listings on the Penny Stock Market 25
III. The Passing of Corrective Legislation 26
IV. The Emergence of SEC Rule 419 27
V. The Emergence of 1st Generation SPACs 28
VI. 2nd and 3rd Generation SPACs and the Leap into European Capital Markets 30
Chapter 2: SPAC Anatomy and Transactional Practice?????????????????????????????????????????????????????????????????????????????????????????????????????????????????? 32
I. Stakeholders 32
1. SPAC Founders and Management Team 32
2. SPAC Shareholders 33
3. Owners and Management of the Target Corporation 33
II. Corporate Governance Structures 33
1. Stipulated Time Frame 34
2. IPO Proceeds Held in Trust 35
3. Shareholder Vote and Right to Opt Out 35
4. Conversion Threshold Through Share Redemption 36
5. Managerial Compensation and Incentive Scheme vs. “At Risk Capital” 36
6. Minimum Fair Market Value Multiple 38
7. Interim Result 39
III. SPAC Transaction: A Twofold Double Trust Dilemma 41
1. Moral Hazard between SPAC Shareholders and Managers 42
2. Moral Hazard between Target Firm and SPAC Managers 44
a) Economic Benefits 44
b) Economic Risk Factors 46
3. Interim Result 48
IV. Case Study: Hicks Acquisition vs. Graham Packaging 48
1. Target Description: Graham Packaging I, Inc 49
2. Deal Terms 49
3. Investment Rationale 50
a) Premium Asset in the Packing Industry 50
b) New World-Class Senior Management Installed in 2006 50
c) Significant Upside Potential to New Investors 50
4. Company Overview and Transaction Structure 50
5. Interim Result 51
V. Summary 51
Chapter 3: SPACs and the Applicable German Law?????????????????????????????????????????????????????????????????????????????????????????????????????????? 54
I. Going Public with a SPAC – Capital Markets Law 55
1. Prospectus Requirement 55
a) SPAC Units Consisting of Shares andWarrants 56
b) Public Offer 57
c) Regulated Domestic Market 58
d) Interim Result 58
2. Prospectus Content 58
a) SPAC-specific Challenges 59
b) Interim Result 61
3. Accessing Alternative Capital Market Segments 61
a) Admission Through the OTC Market 61
b) Admission Through the Regulated Market 62
c) Interim Result 63
4. Interim Conclusion: Capital Markets Law 64
II. Corporate Law Aspects Pertaining to SPACs 64
1. Aspect 1: SPAC Share Subscriptions and Trust Account 64
a) SPAC-specific Challenges 65
b) Interim Result 66
2. Aspect 2: Differing Share Classes for Sponsors and Investors 66
a) SPAC-specific Challenges 67
b) Interim Result 69
3. Aspect 3: SPAC Merger Transaction and Shareholder Approval 70
a) SPAC-specific Challenges 70
b) Interim Result 74
4. Aspect 4: Opt Out and Share Redemptions 74
a) SPAC-specific Challenges 74
b) Interim Result 76
5. Aspect 5: Acquisition or Liquidation 76
a) SPAC-specific Challenges 76
b) Interim Result 78
6. Aspect 6: Naked Warrants 78
a) SPAC-specific Challenges 78
b) Interim Result 79
7. Interim Conclusion: Corporate Law 80
III. SPACs in View of the BGH Judgments on Shell Utilisations 81
1. Shell Utilisations in Germany 81
a) Off-the-shelf Shell versus “Recycled” Shell 81
b) Shell Utilisation versus Business Restructuring 82
2. BGH Judgments on Shell Utilisations 83
a) 2002/2003: Doctrine of “Economic Re-incorporation” 84
b) 2010: Narrower Applicability of an “Economic Re-incorporation” 84
c) 2012: Dismissing Perpetual Liability? 86
d) Attempting to Classify SPACs: Empty or not? 87
3. Legal Consequences for SPAC Transactions 90
a) Disclosure and Register Court Controls 90
b) Adverse Balance Liability 92
c) Action Liability 93
4. Interim Result and Critique on the BGH Judgments 93
IV. Summary 95
Chapter 4: Statistical Analysis of SPACs?????????????????????????????????????????????????????????????????????????????????????????????? 98
I. SPAC IPO and Execution Statistics 98
II. SPAC Excess Return Patterns: Shares and Warrants 100
1. The CAPM Approach 100
a) A Cursory Note on the Mathematical Framework 101
b) A Cursory Note on Market Efficiency 102
c) A Cursory Note on the Estimation of R? and Rm 103
2. Results: Excess Returns on SPAC Shares and Warrants 103
a) The SPAC Dilution Hurdle 105
b) Sensitivity Analysis: Addressing the SPAC Dilution Hurdle 106
3. Interim Results 108
III. Comparative Single Factor Portfolio Regression 108
1. Determining the Beta Equation 108
a) Automatic Rebalancing of Portfolios 108
b) Additional Considerations 109
2. Comparative Regressional Outputs and Interpretation thereof 109
a) Significance of Beta and Risk-adjusted Performance 110
b) Significance of Alpha 111
c) Coefficient of Determination (R2) 112
d) Comment on the Standard Error of Estimate 112
3. Interim Results 112
IV. Analysing the Trading Behaviour of SPACs 113
1. Fama–French Four Factor Regressional Approach 114
a) Market Weighted vs. Equal Weighted Portfolio Regressions 114
b) Interim Results 116
2. Trust Account Statistics 116
V. Pre-IPO SPAC Statistics 118
1. Comparative IPO Time and Cost Structure 118
2. Pre-IPO Target Focus of SPACs 119
VI. Summary 120
Conclusion and Outlook?????????????????????????????????????????????????????????? 122
Bibliography?????????????????????????????????????? 128
Index???????????????????????? 132