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Spac ETF marks high-water mark in the US; Halfords defies Haldane; Renewi wastes

Cash shells and Spacs sound innocuous enough. Blind pools less so. Call them what you will. They are all the rage, at least in the US where an exchange traded fund is being launched to invest in these special purpose acquisition companies. That must mark a high water level for spacs. 

So far this year, tens of billions have been raised stateside by shells that have no assets and are designed to circumvent the arduous disclosure hurdles that go with a bog-standard initial public offering. All a Spac needs is a big-name entrepreneur or financier to back it and a hot topic to pique investors’ interest — autotech, agtech, meditech or fintech works. Raise the money, list the company and find a target later. 

Last year, Richard Branson backed his Virgin Galactic tourism venture into a blank cheque company. He liked it so much he has just launched another one. One of 2019’s most successful cash shells is DraftKings, the online sports betting group now worth $20bn.

The recipe works better in the US than the UK, where investors are warier about writing blank cheques. British-born Martin Franklin, a veteran blind-pool engineer in the US, has been touting plans for a $750m London-listed version for a while. It has yet to happen and there haven’t been any others. 

Perhaps the IPO process works more smoothly in the UK. More likely British backers are nursing the scars from a long line of blank cheque duds. Who doesn’t recall Vallar, the shell brought to us by Nat Rothschild that turned into the doomed Bumi? And who does remember Gloo, which listed in the UK five years ago, raised £30m and vanished in 2018 without landing a deal.

Some UK spacs are stayers. Melrose is one. WPP another. A lot sink without trace.

The London Stock Exchange boasts that 30 spacs have been listed in London in the past five years. More than $2bn has been raised since 2017. But few of us will ever have heard of the shells or the targets, with the exception perhaps of Derriston, which Martin Sorrell used to launch S4Capital, a WPP mark-2. The performance since listing has been equally forgettable. UK investors have long complained that the British versions are blind pools with massive management fees attached. 

In that, the UK is not alone. US spacs tend to be structured differently. But managers extract “founder shares”, which can be hefty and dilutive. Note to would-be investors in the spac ETF, FT research this summer showed that of the cash shells launched in the past four years to 2019, more than half trade below their IPO price.