SPACupdate.com has provided 24/7 Wall Street with some exclusive coverage for the world of special purpose acquisition companies or SPACs. This monitors live deals involving blank check companies, associated stock and warrant transactions and relevant personnel moves. Watch warrant holders to see where the trade winds for blank check votes blow. Two deals have major SPAC players owning warrants that will serve as a barometer as deal votes approach. One already has: TM Entertainment’s merger vote will come tomorrow.
United Refining Energy (AMEX: URX) will merge with Oklahoma City-based oil and natural gas producer Chaparral Energy, the SPAC announced Tuesday. The deal announcement sent the blank checks’ warrants spiking up to 45 cents in Tuesday trading; its shares closed at $9.96.
Thanks to the success of the Hicks Acquisition/Resolute Energy (NYSE: REN) deal—which, as of press time, had successfully generated value after the merger’s close—the $450 million SPAC has an opportunity to cash in on rising investor sentiment.
Yield-to-trust players that still have stakes in the SPAC also have incentive to sell shares to other buyers who will support the merger, or, simply push the deal through. Israel Englander and HBK Investments vehicles control millions of warrants in the SPAC, along with about 20% of its shares, according to the most recently available federal filings. The blank check is looking to have at least half of its warrant owners redeem holdings for $0.50 each at the deal’s closing.
CS China Acquisition Co. (OTC: CSAQF) looks to bring public an Asian gaming promotion company that will operate baccarat tables in South Korea and China. The SPAC will rearrange warrants, lengthening deadlines and raising strike values, as many blank checks have done to entice shareholders and warrant holders to bet on a deal’s success.
Integrated Core Strategies has more than a million warrants in the $32 million SPAC and warrant prices rose to $0.35 in Tuesday trading. The SPAC’s shares are still well off their trust value, up three percent in Tuesday trading, closing at about $5.69. Still, the shares are about $0.30 below their redemption value.
Investors should note that the SPAC’s timetable will allow for its management team to carefully align the blank check’s shareholders prior to a deal vote, which has not yet been announced. CS China’s deal deadline is not until 2011. The SPAC will issue about 10.4 million shares and an equal number of warrants to Spring Fortune Investment, which owns Asia Gaming. The target runs faming facilities in Macau, China, and will launch an additional facility in South Korea.
The SPAC’s deal with its target will increase warrants’ strike price to $6.10 and extend their life to a five-year time frame following their issuance. Their exercise is also contingent upon the target’s GAAP net income exceeding $30 million for the fiscal year prior to activation. The warrants will automatically activate after shares trade regularly above $9.50.
TM Entertainment & Media (AMEX: TMI) will have its deal vote Oct. 15 to bring public a Chinese marketing company. Similar to its liquidation fight with activist investor Phillip Goldstein, who demanded the blank check redeem shareholders and liquidate early in March, TMI’s chances for success are largely attached to Goldstein’s willingness to either sell the shares to a shareholder in support of the deal, or vote in favor himself.
Because he has about two million of the SPAC’s warrants, Goldstein’s approval of the blank check’s deal has the potential to generate value for him, provided he is willing to bet on the target’s chances in the public markets
The SPAC’s warrants are trading at around $0.44 each and its shares are trading $0.41 under trust, at $9.50, so market sentiment could be indicating that the blank check will get its deal done. However, the blank check’s volume has been relatively low for a month. Shares rose about three percent in Tuesday trading, to $7.76.
Next week, three announced SPAC mergers—2020 ChinaCap Acquiro, NRDC Acquisition and Triplecrown (TTY, NAQ, TCW)—will keep investors in the asset class attentive to their deal votes. For more on these SPACs and other blank checks, visit www.SPACupdate.com.