Will SPACs emerge as an Alternative Exit Route?
After 10 years of raising over $100 million from Private Equity & Venture Capital Investors, Yatra.com is to now get listed on NASDAQ through a merger with Terrapin 3 - which basically does "nothing", other than being listed on NASDAQ that is.
What is Terrapin 3?
Terrapin 3 is a "SPAC" (Special Purpose Acquisition Company) or a "Blank Check" company, which according to the US SEC, "..has indicated its business plan is to engage in a merger or acquisition with an unidentified company or companies (within a set time frame)." A SPAC is one where investors' are betting on the jockey (i.e. the management) and not the horse (because there is no horse).*
Terrapin 3 is founded by Nathan Leight,(who has successfully created two previous blank-check companies) and sponsored by Terrapin Partners and Macquarie Group. Terrapin 3 raised over $212 Million via a IPO in July 2014. Terrapin 3 had twenty four months time (till August 2016), to acquire/merge a company or return the capital to its investors. Using the funds, Terrapin 3 can acquire/merge with a company with an Enterprise value of $200 Million to $1.25 Billion.
With the deadline nearing, Terrapin 3 will now use its cash to merge Yatra with itself.
So, is this a good exit route for VC investors in other Indian Internet & Mobile companies as well? Maybe, even for those who have pumped in 100s of millions into Desi Unicorns?
Unfortunately, the chances of that appear dim. The largest SPAC in recent times was CF Corporation, founded by former Blackstone executives, which raised $600 million. Even if the corpus were to be leveraged, Flipkart's $16 billion would be a bridge too far.
What do you think is the best way for @Flipkart @Snapdeal to provide returns to their investors? Why?— Venture Intelligence (@ventureindia) July 18, 2016
Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.