The IPO Buzz: Behind the Blank Checks

Ten IPOs, including a special-purpose acquisition company (SPAC) or “blank check” offering and a Reg. A+ IPO, popped off the new-issues production line last week. This week is cut short by the Thanksgiving Day break and the calendar features just one name – a “blank check” IPO.

Let’s take a quick look at both the “blank check” IPOs and the Reg. A+ offerings.

So far this year, 30 “blank check” companies have gone public, according to the U.S. Securities and Exchange Commission filings. But investors in these IPOs have not been rolling up and down Wall Street in money. So far in 2017, the average opening-day gain per “blank check” IPO was 1.03 percent.

Investing in Blank Checks 101

Basically a “blank check” company is a company that intends to participate in a merger, stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities. If nothing is completed within 18 months, investors should get their money back plus accrued interest. If management comes up with a “target” company, investors can elect to accept the deal or reject it and get their money back.

It is like buying a call and getting your money back – plus interest – if nothing happens after 18 months. Nevertheless, read the final prospectus to see where you stand on your investment.

Looking at Legacy

Legacy Acquisition (LGC.U), based in Cincinnati, Ohio, is the “blank check” company that went public last week. Legacy plans to focus on businesses that operate in the following sectors: (i) consumer packaged goods and other consumables; (ii) consumer durables, and (iii) retail and restaurants.

The company priced 30 million units at $10 each on Thursday evening, Nov. 16. Legacy’s units closed Friday, their first day of trading, at $10 each on the New York Stock Exchange.

Betting on Seniors

This week Big Rock Partners Acquisition (BRPAU – proposed), based in Delray Beach, Florida, is scheduled to go public. Big Rock Partners Acquisition is a “blank check” company that plans to focus on businesses in the senior housing and care industry in the United States.

Big Rock’s unit offering is expected to be priced Monday, Nov. 20, to trade Tuesday, Nov. 21, on the NASDAQ.

(For more information about the company on the IPO calendar, please check the profile found on’s website.)

Understanding Reg. A+ IPOs

Now let’s move on to the Reg. A+ IPOs.

Regulation A (Reg A) offerings date back to the Securities Act of 1933. This regulation was an exemption from registration for smaller issuers of securities. It permitted small-cap deals to be offered to the investing public without requiring registration of the stock with the SEC.

Reg. A+ offerings are a recent creation, made possible by final rules adopted in 2015 by the SEC to let small-cap companies go public and exempt them from the registration requirements. The updated exemption lets smaller companies offer and sell up to $50 million of securities in a 12-month period, subject to eligibility, disclosure and reporting requirements, according to the SEC.

Seven Reg. A+ IPOs have been priced so far in 2017, according to the financial press.

But there is a difference between a regular IPO and a Reg. A+ offering.

In a regular IPO, investment bankers buy the entire offering from the seller, such as the company and/or insider investors, at the issue price less underwriting commissions. At this point, the bankers own the IPO. Then they re-offer the deal to investors at the issue price.

Reg. A+ offerings are deals between investment bankers and the sellers, but bankers do not buy the IPO from the sellers. Bankers act as selling agents and agree to sell what they can under an agreement called a “best efforts” offering. Then the IPO is offered to investors in the form of an Offering Circular.

Revisiting a Reg. A+ Deal

Level Brands (LEVB), based in Charlotte, North Carolina, is a Reg. A+ offering that was priced last week. Level Brands is a marketing and licensing company supported by Kathy Ireland, a business mogul and former supermodel (Sports Illustrated Swimsuit issue in the 1980s and 1990s). Level Brands says it provides bold, unconventional and socially responsible branding for leading businesses. Among the company’s leading brands: Kathy Ireland’s hair products.

Level Brands offered up to 2 million shares at $6 each on a “best efforts” basis last week.

Take a look at Level Brands’ Offering Circular. The Reg. A+ deal’s stock closed Friday, Nov. 17, at $5.55, down 7.5 percent from its initial offering price.

After Thanksgiving Week

For the week of Nov. 27, 2017, the IPO calendar is clean and green. But when the SEC opens its filing window again on Monday morning, anything can happen.

Stay tuned.

Disclosure: Neither the author nor anyone else on the staff has a position in any stocks mentioned, nor do we trade or invest in IPOs. The author and staff do not issue advice, recommendations or opinion.