The CEO of a Seattle investment bank that sponsored a SPAC presently looking for an acquisition target in Pittsburgh discussed the market for special purpose acquisition companies as part of a panel event by the Pittsburgh Venture Capital Association on Wednesday.
Michael Butler, CEO of Cascadia Capital LLC, and fellow participants Lynn Kirkpatrick, CEO of San Diego-based Ensysce Biosciences, which went public via a SPAC, and Eric Kline, a partner at law firm Troutman Pepper, addressed the theme of SPACs as a financing source for tech companies.
SPACs are public companies that attract funding from investors anticipating that the SPAC will buy potentially valuable assets from another company, Kline explained.
Cascadia’s decision to sponsor a SPAC began earlier this year, in response to client requests.
”Our clients were approached by SPACs and they were intrigued, but the SPAC sponsors were two guys who met two months earlier working out of a WeWork,” Butler recalled. “One thing led to another and clients asked Cascadia if we’d considered sponsoring a SPAC.”
Cascadia did research, determined that “it made a lot of sense for us,” prepared the paperwork and “then the market fell apart.” SPACs and initial public offerings were in a several month rocky period.
“Wall Street overshoots,” Butler said. “The market was in a digestive period March, April, May, June.”
Cascadia met with 16 investors via Zoom and 12 decided to invest in Cascadia Acquisition Corp., which closed a $150 million offering on Aug. 30. Cascadia Acquisition (NASDAQ: CCAIU), is looking to buy a company in the robotics/AI/automation space, and is seeking opportunities in Pittsburgh. It has until early 2023 to seal a deal.
Butler said the market is now going through a period of determining quality.
“The SPAC sponsors that are quality are able to go public,” he said. “The market is really taking a hard look at what merger candidates these SPACs come up with and go through a deep diligence process to make sure the merger companies are public company ready. That’s why you have so many SPACs out there searching for candidates.”
Butler figures the market is in the third or fourth inning of working through the concept of SPACs
“The view seems to be the IPO market will stabilize and enter equilibrium in early 2022,” he said. “The PIPE (private investment in public equity) market will stabilize in late 2022, early 2023.”
