Betty Liu, CEO and chairman of D and Z Media Acquisition (NYSE: DNZ.U) Rings The Opening Bell at The … [+]
New York Stock Exchange
When Betty Liu was vice chair of the New York Stock Exchange and chief experience officer of the Intercontinental Exchange, their mission was to make public markets more accessible to investors and private companies. She is still a believer in that mission but recently has chosen another path to achieve that goal.
Women have been underrepresented as capital allocators, in the C suite, at the board level, and as investors. “Having your own SPAC [special purpose acquisition company] is a chance to rewrite corporate America,” said Liu. “It’s an opportunity to invest in women at the helm of publicly owned companies, build diverse corporate boards from the birth of a company, and have more women investing.” Other Forbes writers such as Jane Hanson and Maggie McGrath have reported on women and SPACs, too.
When healthy, scaling, early-stage companies want to raise a lot of money, some do an initial public offering (IPO), enabling them to raise capital from the general public and institutional investors. SPACs are another way to access the public markets. In some ways, they are easier than doing an IPO. As a “blank check company,” documentation filings are somewhat different.
Firms filing for IPOs are only allowed to report historical financial performance. They are not legally allowed to make projections or forward-looking statements on their performance. SPACs, as mergers, have “safe harbor” or protection from legal liability for forward-looking statements.
A SPAC is a shell corporation listed on a stock exchange. Its sole purpose is to acquire a private company. The opportunity usually has yet to be identified. It is often in sectors such as electric vehicles, green technology, consumer-oriented technology, communications, and retail.
From the time a SPAC lists and raises money through an IPO, it has 18 to 24 months to find a private operating company with which to merge. If a SPAC can’t find an acquisition target in the given time, it liquidates and returns the IPO proceeds to investors plus interest. SPAC investors also can change their minds should they not want to participate in the merger. They can redeem their shares and get back their money.
“It’s the SPAC management team—and perhaps some of the board members—who put up the initial capital to go out and go to the SEC, fill out the documentation, go and make a roadshow presentation to test whether or not this team is going to get the financial support of different institutions,” said Kay Koplovitz. She is on the board of Athena Technology Acquisition Corp and more recently, the Athena Consumer Acquisition Corp. Both are all-female SPAC teams including its management team, board of directors, and independent advisors. Koplovitz is also co-founder and chairman of Springboard Growth Capital, which invests in growth-stage consumer companies; co-founder and chairman of Springboard Enterprises, an accelerator that fosters venture capital and family office investment in women-led high-growth companies; and founder and former CEO USA Networks Cable. Athena Technology Acquisition recently announced a business combination with Heliogen, a leading provider of AI-enabled concentrated solar energy.
2020 and the first quarter of 2021 saw a massive surge in SPAC activity. There were a couple of reasons for this surge, commented Koplovitz. Over the previous couple of years, the SEC had changed some of the requirements for SPACs. When Covid-19 started, it became a desirable pathway for many companies that were considering going public.
Liu is now CEO and chairman of D and Z Media Acquisition; a SPAC focused on the intersection between media and education technology. It went public in January of 2021. “We were 10 times oversubscribed and raised $288 million, which can be allocated to a company that we will eventually acquire,” she said.
The SPAC’s selling proposition is based on the reputation of the management team. When she was at the NYSE, Liu worked on more than 25 of the biggest IPOs. She was a business journalist for more than 25 years, was part of the transition of media from analog to digital, and was at companies where the subscription business blossomed. She also started an edtech company, Radiate. Mark Wiltamuth joins her as CFO. He previously worked at Petco and worked in equity research at Morgan Stanley and Jefferies.
Liu and her team add value to the company they hope to merge with, advising on things ranging from future M&A deals to helping put together an internal rate of return (IRR) strategy. IRR is a metric used in financial analysis to estimate the profitability of potential investments. For the CEOs of an acquisition target, it’s likely the first time they’re going public. “Having that experience of going public is critical,” said Liu. Frequently, a member of the SPAC—likely the CEO—joins the new company’s board.
Liu is passionate about empowering and mentoring women. She does this in three ways: pay equity, board diversity, and investor diversity. “There’s such an underrepresentation of women and minorities as investors,” she said. “That needs to evolve and change. I think SPACs can be a key component of that.”
“I want to give retail investors [the general public] the opportunity to invest in the success of entrepreneurs,” Liu said. There is a need to educate the public on what SPACs are and the potential for diversifying investors and diversifying the types of funded companies.
“Make sure you read as much information as possible before you invest,” she advises. “Read the S-1, the prospectus. As a blank-check company, it is not an operating company. It’s even more important that you believe in the CEO, CFO, board, and the advisors that they have around them.”
Liu’s advice to private company CEOs raising money through a SPAC is to nail your storytelling. All too often, she’s seen presentations by CEOs and their management teams that haven’t captured the company’s vision.
“The only measurement we [women-led SPACs] are going to be judged on is how successful our merged company compares to everybody else’s,” said Koplovitz.
How will you experiment with SPACs?
