The Man With More SPACs Than Anyone


    The Man With More SPACs Than Anyone

    Alec Gores has built a SPAC machine.

    The billionaire investor, who first tried his hand at the unconventional reverse-merger IPO process in 2015, has watched the market for SPACs reach a fever pitch over the last two years. As the market swelled, he became a serial SPAC backer. He has methodically created 13 special-purpose acquisition companies, more than any other single investor, according to data provider SPACInsider.

    Mr. Gores is a veteran when measured in SPAC years. He believes in the process, which had been criticized as an avenue to take sketchy companies public. His firm, Gores Group, opens its own checkbook for every deal—unlike many other SPAC investors—and sometimes even lands deals despite underbidding his competitors, he says.

    “We’re building a franchise,” Mr. Gores said in an interview from his home in Malibu, Calif. “We’re developing a playbook that gets improved every day.”

    Last year, Mr. Gores was in deal talks with Austin Russell, the 26-year-old chief executive officer of Luminar Technologies Inc. Despite the global Covid-19 pandemic, the SPAC market was on fire. Bankers said Mr. Russell’s self-driving-car sensor company could easily secure a $9 billion valuation.

    To get needed cash for his self-driving-car sensor company, Austin Russell merged his Luminar Technologies with a Gores Group SPAC.

    Photo: Nasdaq

    Instead, Mr. Russell said he would merge with a Gores Group SPAC that valued his company at a fraction of that—$2.9 billion. Mr. Russell was drawn to Mr. Gores for his industry knowledge and the influence of the Gores name in the SPAC world. Mr. Gores also provided him something he needed: cash. Mr. Gores’s deal gave Luminar an immediate infusion of $300 million that the company could keep whether or not the deal closed.

    “We don’t buy you,” Mr. Gores said he told Mr. Russell, who also got to keep his supervoting shares in the deal. “You’re selling a small stake in your company to get capital to finish your dream.” Shortly after the deal closed in December, Luminar’s stock had risen and its valuation had surpassed the $9 billion level.

    As he has sought to master other complicated elements of SPACs, Mr. Gores still follows his instincts on due diligence and says his in-person interactions with founders are critical.

    This year, before Mr. Gores signed a deal to merge one of his SPACs with a recyclable-metals business from Ardagh Group SA, he and other Gores executives flew to the Bahamas. There, they met Paul Coulson, the chairman and chief executive of Ardagh, who was working from his docked yacht. Mr. Gores chartered his own yacht and parked it next to Mr. Coulson’s.

    “I wanted to make sure I felt good about this partnership,” said Mr. Gores, who had previously met Mr. Coulson only on Zoom calls. After spending time with Mr. Coulson and his family over a week of negotiations and barbecues on their boats, Mr. Gores signed an $8.5 billion deal for a division of Ardagh.

    Private companies are flooding to special-purpose acquisition companies, or SPACs, to bypass the traditional IPO process and gain a public listing. WSJ explains why some critics say investing in these so-called blank-check companies isn’t worth the risk. Illustration: Zoë Soriano/WSJ

    The SPAC market has exploded over the past year, with much of its growth fueled by newcomers. This year, the shell companies—which list on a stock exchange and then are tasked with buying a target company to take its place in the stock market—have raised more than $100 billion, according to Dealogic.

    Mr. Gores, 68, who minted billions in the private-equity industry, has signed deals to take public via SPAC the Twinkie maker Hostess Brands Inc. ; an online mortgage originator; a spatial-data company; and a short-term rental company, among others. Where most SPAC outfits have a small team, Mr. Gores employs more than 30 people, including lawyers, tax professionals, marketing executives and finance and operations specialists, who work on each SPAC.

    “When the Gores team launches a new SPAC, the demand for the deal is already there,” said Kristi Marvin, founder and CEO of SPACInsider. “They have enough experience and credibility that most investors are going to want to participate.”

    The oldest of six children, Mr. Gores immigrated to Flint, Mich., from Israel as a teenager in 1968, where his family settled in a two-bedroom apartment. He and his siblings learned to speak English while bagging groceries at his uncle’s store. That job helped him pay for college at Western Michigan University, where he studied computers and landed a position at General Motors Co. upon graduating.

    Within six months, Mr. Gores decided he couldn’t work in a large corporation and quit, striking out on his own to build a company that bought and distributed computers. In 1978, he sold that company for $2 million and used some of the proceeds to look for a business to buy. Ultimately, he built an investment firm focused on buying, resuscitating and selling underperforming divisions of public companies. He turned the $2 million into billions.

    Alec Gores says he wants ‘to be the best SPAC guy in the world.’

    Photo: Jennelle Fong for The Wall Street Journal

    By the 2010s, he was itching for new investment opportunities. Some of his employees suggested trying to raise a SPAC. Mr. Gores was skeptical of the structure but intrigued enough to pitch the idea to hedge funds. Days of meetings arranged by Deutsche Bank AG led to several hundred million dollars in commitments.

    In 2016, Mr. Gores merged his first SPAC with Hostess, which his friend Dean Metropoulos and Apollo Global Management Inc. had bought out of bankruptcy. As part of the deal, Mr. Gores and others also did the first PIPE investment, known as private investment in public equity, which along with the SPAC proceeds was used to buy out part of Apollo’s stake. PIPEs have since become a pillar of many SPAC deals.

    With Mr. Gores’s second and third SPACs, he bought companies from his brother, Tom, who runs a private-equity firm, Platinum Equity. The brothers recused themselves from negotiations. Still, some Gores employees said at the time they were worried Mr. Gores might struggle to find targets outside his connections, according to people familiar with the situation. A Gores Group spokeswoman said the mergers made sense because several of Platinum’s portfolio companies were the right fit, and private-equity firms at the time weren’t as open to deals with SPAC sponsors as they have become.

    The record on those mergers is mixed. The first of them— Verra Mobility Corp. , which provides technology for fleet management—closed in October 2018, and its share price is up nearly 50% from the SPAC’s $10 IPO since then. The second of them— PAE Inc., which provides services to the U.S. government—closed a deal with Gores in February 2020, and its share price is down about 10%.

    By 2020, SPACs were booming and Mr. Gores started to see different kinds of companies sell to SPACs, including Richard Branson’s space firm Virgin Galactic Holdings Inc. and sports-wagering firm DraftKings Inc. “I’m paying attention to what other people are doing. I’m a student all the time,” he said. “I started thinking I could build a real franchise in SPACs.”


    What’s your take on Alec Gores’s approach to SPAC financing and purchasing? Join the conversation below.

    By 2020, Mr. Gores began to look at venture-backed technology companies and biotechnology companies. He struck deals with Luminar and other tech firms. He has hired two senior executives from SoftBank’s Vision Fund. He has also joined with other firms, including Guggenheim Partners LLC, to launch more. He is considering expanding into more industries, including sports and entertainment, and new geographies including Europe and Asia.

    His work on SPACs has become so consuming that in recent years he has had little time for one of his few hobbies—poker. Mr. Gores had hosted a regular Monday night poker game at his home with his friends where he says the buy-in was sometimes $1 million. Now he is too busy seeking out deals.

    “My vision for the SPAC world is first to do this for a long time,” said Mr. Gores. “I focus 100% of my work energy into this. I want to be the best SPAC guy in the world.”

    When SPACs Attack

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    Published at Tue, 04 May 2021 20:34:00 +0000

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