How Are Special Purpose Acquisition Companies Affecting The Media Industry

Special purpose acquisition companies – also known as SPACs – have been somewhat seen as an upgrade to the traditional IPO investment in recent times. The vehicle has been a specific target of entities in the media industry but there seems to still be caution around 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 purchase existing companies. Similar to the concept around crypto, it allows general investors to get in early to a potentially high-growth company, and also carries the risk of losing money in SPACs that don’t do well. The vehicles are usually helmed by someone noteworthy that can harness public confidence and attract investors.

SPACs have been somewhat of an enigma so far with numerous tales of growth and also of calamity.

Investor and corporate advisor, Michael Streets, who has just acted as financier for the €43 million Paris listing, CMG Cleantech, said on the trend, “Most people know investment always carries risk, I think however with SPACs people must be even savvier. You cannot just look at the name fronting and then think everything is going to be ok. 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 strongly consider getting involved or not.”

In 2021, WarnerMedia’s former Europe president, Iris Knobloch, left the company after 25 years of service to start a SPAC named I2PO. The $300 million investment vehicle was started through Euronext Paris and had backing from French billionaire François-Henri Pinault’s Artemis.

Knobloch said on announcing the venture last year: “Europe is home to many solid companies with high potential in this sector, which, through the contribution of capital, resources and expertise by I2PO, will have the necessary support to take their business to the next level,”

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

The SPACs first move was confirmed this year. To bring the French music streaming platform, Deezer, public at a $1.1 billion valuation. The goal is to capitalize on the growing music streaming market and to pursue several markets around the world through further investment and growth.

On the other side, however, Buzzfeed went public late last year through a SPAC merger but its earnings report and performance were sub-par juxtaposed to what was told to investors. Leading to pressure from said investors to make drastic changes within the organization, including cuts to the news team.

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

Focused on the entertainment sector in media, the company had a $230 million IPO on the Nasdaq in August. The SPAC aims to become a media conglomerate, owning areas in several 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 prior Disney executives in Kevin Mayer and Tom Staggs in March of last year. Though they raised $350 million and took two fitness entities, The Beachbody Company and Myx Fitness Holdings, public they have since lost 80% in value.

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

Even with many cautionary examples, the SPAC trend seems to be ongoing. Several companies in different sectors – such as social media entity OnlyFans – are circling the possibilities and plotting for the best time to launch. SPACs certainly don’t seem like a sure thing but they appear to have their uses for now.