Billionaire plans liquidation of trio of Boulder-based SPACs without merger deals

BOULDER — Special purpose acquisition companies have one, well, special purpose, and that’s to merge with a privately held company and take it public. 

But sometimes those merger deals simply don’t materialize, and SPACs must liquidate. That’s exactly what’s happening with a trio of private-equity billionaire Alec Gore’s Boulder-based SPACs, which, failing to find dance partners, plan to return about $1.3 billion to investors before the end of the year. 

A SPAC is a publicly traded shell company with a built-in two-year lifespan that represents an alternative to the traditional initial public offering process. When a SPAC, often formed by venture capitalists, identifies a company to acquire, its shareholders vote on the deal, and if approved, the combined company often takes on a new name and ticker symbol.

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Pending approval next month from shareholders, Gores Technology Partners Inc. (Nasdaq: GTPA, GTPAU, GTPAW) will return $275 million in cash proceeds raised during its 2021 initial public offering, Gores Technology Partners II Inc. $460 million, and Gores Holdings VII Inc. $550 million, according to regulatory disclosures made this month. 

“We remain active in SPACs and continue to be committed to the SPAC product in the long-term,” Gores, who serves as CEO of his SPACs, said in a prepared statement. “Given the current market environment, we believe liquidating any expiring vehicles and returning capital to our shareholders as soon as possible is the best immediate path forward. The Gores Group believes that while the current reset in the SPAC market is necessary in light of the activity over the past two years, the SPAC product is an excellent financing tool for the right companies and situations. We look forward to continuing to leverage this vehicle to help quality companies raise capital and go public as we go through 2023 and beyond.”

Gores has successfully completed 10 SPAC mergers, taking public companies including iconic snack food maker Hostess Brands Inc. (Nasdaq: TWNK) and Luminar Technologies Inc. (Nasdaq: LAZR), which has developed a suite of laser and sensor technology for autonomous vehicles. 

“Since the closing of the company’s IPO, the company’s leadership has conducted a thorough search for the right target and evaluated a number of companies with the goal to complete an initial business combination that met its investment criteria,” the SPACs said in their disclosures. “Further, the company’s leadership has carefully evaluated the current adverse market conditions, including a limited pool of public company-ready business combination partners, the overall decline in the SPAC market, high redemption rates of SPACs, increased regulatory uncertainty around SPACs and the deterioration of the [private investment in public equity] market. Considering these factors, and despite significant efforts to identify and complete an initial business combination, the company’s leadership does not believe that it will complete an initial business combination by March 16, 2023,” the two-year deadline for striking a merger deal. 

SPACs are sometimes referred to as blank-check companies and earned a pretty unsavory reputation in the 1980s due to lack of regulatory oversight.

In the decades that followed, blank-check companies were rebranded as SPACs, and new regulations were introduced that forced managers to hold investment funds in escrow until the merger was complete. 

While SPACs in their current form have existed for years, they gained steam significantly during the COVID-19 pandemic, but the market has cooled in recent months. 

When SPACs fail to merge, the people responsible for launching the operation often take seven-figure losses. That’s not likely to cause much heartburn for Gores, whose past SPAC successes represent $60 billion in transaction value.

While SPACs are traded on Wall Street, they often have Main Street connections, particularly in tech-centric regions such as the Boulder Valley and Northern Colorado.

Loveland-based Lightning eMotors Inc. (NYSE: ZEV) merged with a SPAC in 2021 and is now trading on the New York Stock Exchange, while Boulder biotech company SomaLogic Inc. (Nasdaq: SLGC) merged with a SPAC last year and is traded on the Nasdaq exchange.