The celebrity SPAC line-up just got a high-profile new player — a quite literal heavy-hitter. Former Yankees all-star third baseman Alex Rodriguez is throwing his hat into the SPAC market, with his Slam Corp. reportedly looking to raise $500 million in its initial public offering (IPO). Rodriguez is the primary backer of the firm, alongside hedge fund Antara Capital.
The Slam Corp. special-purpose acquisition company will enter the market selling 50 million units, comprising shares and warrants, priced at $10 apiece in the IPO. The SPAC is in turn backed by Rodriguez’s A-Rod Corp, which invests in startups like Apartment For List and Nova Credit.
SPACs have emerged as a popular IPO alternative for companies, as they provide an easier path to the public markets with fewer regulatory hurdles and greater certainty about the outcome. A-Rod’s SPAC play comes about three months after his attempt to purchase the New York Mets did not end in a buy.
And while A-Rod is the latest and certainly a splashy entrant into the field, as the SPAC market has heated up over the last year or so, an increasing number of high-profile people have made their way into the market. Baseball executive Billy Beane (of “Moneyball” fame), former astronaut Scott Kelly, basketball luminary Shaquille O’Neal, former Speaker of the House Paul Ryan and billionaire David Geffen don’t easily fit on a lot of lists together, but they all have one thing in common: They are all involved in SPACs, according to reports.
The allure is pretty obvious: There is a lot of money to be made in the segment. More than 200 SPACs have gone public in 2020, raising some $75 billion — more than in the previous decade. That increase has upped the ante on the competition for the most attractive merger targets, meaning promising startups are participating in “SPAC-offs,” where companies meet with several SPACs in a row to choose which to go public with.
The draw of a big name on a SPAC — like a celebrity — could provide just enough intangible advantage to cinch a desirable deal. RedBall Acquisition Corp., for example, claims that Billy Beane and Nobel Prize-winning economist Richard Thaler as directors, and raised $575 million in an August IPO. RedBall is currently in talks to merge with Fenway Sports Group — owner of the Boston Red Sox and the reigning English soccer champions, Liverpool F.C. — in a deal that could value the company at around $8 billion. It’s a deal made possible, in large part, by Beane’s connections in baseball.
And yet celebrity SPACs have successfully raised a lot of suspicion among market watchers like Jim Cramer, who loudly and passionately advised retail investors to steer clear of the celebrity SPAC boom. “These newer SPACs increasingly feel like an inside joke for the super-rich, and a way for celebrities to monetize their reputations,” Cramer noted.
SPAC share prices have held up so far, Cramer acknowledges, but he believes that is mostly happening on the strength of the buzz they built in 2020. At some point, this enthusiasm bubble is going to burst, he predicts — and the celebrity SPAC backers almost certainly aren’t going to the parties left “holding the bag” when the music stops, but the everyday investors who followed along.
Whether Cramer’s prediction for celebrity SPACS ends up being a bit overly grim in the long run remains to be seen. It wouldn’t be the first celebrity investing trend in recent memory to have ended with a boom — anyone remember ICOs?
But if the rich and the famous become even more rich and famous with the help of investing in SPACS, we imagine the trend could stick around for some more of 2021.
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