A rush of media and advertising companies are going public via SPACs. Here’s why Playboy, CuriosityStream and Digital Media Solutions are betting on blank-check deals.

Playboy CEO Ben Kohn

Summary List Placement

SPACS, or special-purpose acquisition companies, are the hottest area in investing.

SPACs, also referred to as “blank-check companies,” are shell companies set to raise money for the sole reason of acquiring companies. When a company merges with the shell, the publicly traded SPAC quietly takes a formerly private business public — avoiding some of the scrutiny, cost, and time involved in the traditional IPO route.

Some investors have looked askance at a company that goes public through the back door of a SPAC instead of going the traditional IPO route. Critics also said that SPACs lent themselves to companies who failed to find buyers.

But as the recession has changed how SPACs are viewed, a growing list of media and advertising companies are going public this way.

For example:

Playboy Enterprises is going public via a merger with Mountain Crest Acquisition, giving Playboy $100 million in cash toward growth plans. 
Former Hearst executive Joanna Coles is leading a SPAC company called Northern Star Acquisition Corp that is looking to raise $300 million and focus on beauty, digital media, wellness, fashion, subscription, e-commerce, and self-care businesses.
Streaming service CuriosityStream is merging with Software Acquisition Group, injecting about $180 million in cash into CuriosityStream, including a $25 million private investment in public equity.
Adtech firm Digital Media Solutions merged with a SPAC, Leo Holdings, in July in a deal valued at $757 million.
A group of former Disney employees, Shaquille O’Neal, and one of Martin Luther King Jr.’s sons created a SPAC called Forest Road Acquisition Corp. with the goal of raising $250 million for deals like streaming platforms and intellectual property.

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“The public markets have gotten harder to enter,” said Corey Ferengul, who has led multiple advertising and media deals as a buyer and seller over the years and is a board member for several companies. “Media and adtech companies don’t have easily definable recurring revenue like a SaaS company and are dealing with a very volatile [advertising] market. There is so much unpredictability that it makes it hard for companies to go through the big spectacle and process of [becoming] a public company.”

SPACs offer an alternative to the brutal public markets or tough funding environment

Over the past few years, investors have significantly pulled back on advertising and media companies as they’ve lost billions in value. The M&A landscape has also gotten more competitive with media and advertising companies as more of them focus on getting profitable before pursuing big acquisitions.

For that reason, David Steinberg, CEO of marketing-tech firm Zeta Global who has made a number of acquisitions, said that SPACs are increasingly looking attractive to advertising and media companies as a way to raise funds. SPAC companies can also provide longer windows of financial guidance for investors.

“The advertising technology space has been so decimated — you have to do a better job of explaining your business and getting investors on board,” he said. “There used to be a negative connotation with SPACs, [but] that’s gone away.”

SPACs can also avoid pricing difficulties that come about when merging …read more

Source:: Businessinsider – Finance


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