The IPO Buzz: Slow March as Russia Attacks Ukraine Nuclear Plant

Four SPACs – and no IPOs – got done in the first week of March. The world watched in horror after Russian military forces attacked a nuclear plant in southeastern Ukraine on Thursday night (March 3, 2022). The attack provoked fear of a meltdown “that could dwarf the world’s worst nuclear disaster, at Ukraine’s Chernobyl in 1986,” according to The Associated Press.  (Editor’s Note: This column, published Saturday, March 5, was updated twice – on Monday with news on Mobileye and on Tuesday with news of a small-cap SPAC IPO’s pricing.)

In what The AP described as an emotional nighttime speech, Ukrainian President Volodymyr Zelensky said he feared an explosion that would be “the end for everyone. The end for Europe. The evacuation of Europe.”

U.S. stocks fell on Friday, wrapping up another volatile week, as worry about the war in Ukraine overtook a strong U.S. jobs report. The Dow Jones Industrial Average lost 179.86 points, or 0.5 percent, to end Friday at 33,614.80, while the Nasdaq Composite Index slid 224.50 points, or 1.7 percent, to close at 13,313.44. The S&P 500 dropped 34.62 points, or 0.8 percent, to end at 4,328.87. For the week, both the Dow and the S&P 500 fell 1.3 percent, while the Nasdaq skidded 2.8 percent.

Russia kept up “its broad offensive in Ukraine on Saturday, pummeling cities and towns into rubble, even as it announced a limited cease-fire for the besieged southern city of Mariupol, as well as for a second, smaller city,” The New York Times reported. Thousands of Ukrainian women and children packed trains bound for neighboring countries, as husbands and fathers touched the windows and waved goodbye, according to The New York Times; the paper noted that, according to the U.N., more than 1 million Ukrainians have fled to neighboring countries in the past week.

U.S. stocks dove on Monday (March 7th) after President Biden announced a ban on the import of Russian oil.

1 Small SPAC Priced Tuesday, March 8th

No IPOs are scheduled for the week of March 7. One small-cap SPAC IPO, Lakeshore Acquisition II Corp. (LBBBU proposed), was priced Tuesday night (March 8) for trading Wednesday on the NASDAQ. The deal was priced in line with the terms in its prospectus: 6 million units at $10 each to raise $60 million. Network 1 Financial Securities was the sole book-runner. Lakeshore II’s SPAC marks the 49th blank-check or SPAC IPO priced so far this year.

A few more SPACs may follow this week. One on the watch list is Patria Latin American Opportunity Acquisition Corp. (PLAOU proposed) – 20 million units at $10 each; J.P. Morgan and Citigroup are the joint book-runners.

March Rides in with 4 SPACs

Bankers raised $725 million by pricing four SPAC IPOs this week. One began trading on Tuesday, March 1; the other three made their debuts on Wednesday, March 2, 2022:

  • Valuence Merger Corp. I (VMCAU) – $200 million – SVB Leerink and Baird were the joint book-runners. The units started trading on NASDAQ on Tuesday.
  • Kensington Capital Acquisition Corp. IV (KCAC.U) – $200 million – UBS Investment Bank and Stifel were the joint book-runners. The units started trading on the New York Stock Exchange on Wednesday.
  • SHUAA Partners Acquisition Corp. I (SHUAU) – $100 million – BTIG, LLC was the sole book-runner. The units began trading on NASDAQ on Wednesday.
  • Sound Point Acquisition Corp. I, Ltd. (SPCMU) – $225 million, upsized at pricing from $200 million in the prospectus – BofA Securities and J.P. Morgan were the joint book-runners. The units started trading on NASDAQ on Wednesday.

In comparison, the final week of February 2022 produced $545 million in IPO proceeds from three SPAC IPOs:

  • Clean Earth Acquisitions (CLINU) – $200 million – Citigroup and JonesTrading were the joint book-runners.
  • FG Merger Corp. (FGMCU) – $70 million – ThinkEquity was the sole book-runner.
  • GSR II Meteora Acquisition (GSRMU) – $275 million – Oppenheimer & Co. was the sole book-runner.

So far in 2022, bankers have priced a total of 48 SPAC IPOs.

EF Hutton and Cantor Fitzgerald were the left-lead underwriters on 12 SPAC IPOs so far this year, raising more than $2 billion, Bloomberg reported on Monday (Feb. 28). The pace of new blank-check companies going public is brisk “even as the market for old ones is in free-fall,” the Bloomberg story noted.

“EF Hutton’s SPAC sausage machine is cranking them out at full blast,” Kristi Marvin, founder and CEO of SPACInsider, wrote in a weekly newsletter, quoted in the Bloomberg story.

“However, the banks are only executing based on demand,” Marvin said in a follow-up email to Bloomberg. “You can’t IPO if there isn’t any demand from both investors as well as the sponsor teams wanting to do them.”

A Peek at the Pipeline

At the SEC’s filing window, a few new filings trickled into the IPO pipeline in the first week of March. Three companies filed to go public via traditional small-cap IPOs. Two SPACs (special purpose acquisition companies, also known as blank-check companies) also filed to go public. The round-up:

  • AN2 Therapeutics, Inc. (ANTX proposed) – Clinical biotech developing a drug to treat non-TB lung infections. Estimated IPO proceeds: $75 million. Cowen, SVB Leerink, Evercore ISI and Oppenheimer & Co. are the joint book-runners.
  • Visionary Education Technology Holdings Group (VEDU proposed) – Canadian company offering private education in classrooms and online in studies ranging from grades 9-12 in Ontario to career-oriented two-year college and four-year university diploma programs, as well as vocational education and master’s degree programs. Estimated IPO proceeds: $23 million. Joseph Stone Capital is the sole book-runner.
  • OKYO Pharma (OKYO proposed) – Preclinical biotech developing a new drug – prescription eye drops – to treat dry eye disease. Estimated IPO proceeds: $12 million. ThinkEquity is the sole book-runner.
  • Makara Strategic Acquisition Corp. (MKARU proposed) – Natural resources, clean energy and energy storage in the Americas, Europe or Asia are in focus at this Princeton, N.J.-based SPAC. Estimated IPO proceeds: $250 million. EF Hutton is the sole book-runner.
  • Denali Capital Acquisition Corp. (DECAU proposed) – Technology, hospitality and consumer services companies are on the target search list of this New York-based SPAC. Estimated IPO proceeds: $75 million. Tiger Brokers and EF Hutton are the joint book-runners.

Most IPO investors, however, are waiting for the launch of some mega deals in the IPO pipeline, including Bausch+Lomb Corp. (BLCO proposed), the global eye health company being spun off by Bausch Health Companies, Inc., and Chobani, Inc. (CHO proposed), which notes that its brand is No. 1 in the total yogurt category. Some reports estimated the proceeds of the Bausch+Lomb IPO at $3 billion, while pegging Chobani’s IPO haul at around $1.5 billion.

Reddit, the home of r/WallStreetBets, the online community for day traders, made headlines in mid-December 2021 with its blog post that it had filed confidential IPO documents with the SEC, according to The Wall Street Journal.

Intel said in early December that it planned to take its self-driving unit Mobileye public sometime in 2022, The Wall Street Journal reported in an exclusive story (published online Dec. 6, 2021). On Monday (March 7, 2022), Intel said it had filed confidential documents with the SEC for Mobileye to go public, Bloomberg reported.

Worth noting: Neither Reddit nor Mobileye has filed an S-1 (IPO prospectus) yet.

War, Oil and Rates

The nearly frozen IPO Calendar reflects the fear and uncertainty on Wall Street as Russia’s invasion of Ukraine entered its second week. U.S. oil futures on Friday topped $115 a barrel – the highest close since September 2008.

“If oil goes to $200 a barrel, as some of these hedge funds think it might, and if inflation continues to rage, I think 50 basis points (an increase in the fed funds rate) is necessary to rein in inflation,” a seasoned IPO investor said on Friday.

Federal Reserve Chairman Jerome Powell said on Wednesday (March 2, 2022) that he would support a 25-basis-point rate increase at the FOMC’s March 15-16 meeting, noting in his congressional testimony that Russia’s invasion of Ukraine was “a game changer,” as Reuters reported. Before his testimony, many on Wall Street had expected a 50-basis-point rate hike. The stock market rallied Wednesday on relief over Powell’s comments, The Wall Street Journal reported.

“The Fed should just go, “Happy St. Patrick’s Day. Here’s 50 basis points,’ and get it out of the way,” the seasoned IPO investor said.

The countdown to the Fed’s interest-rate decision has 11 days to go.

Stay tuned.

(Never trade on proposed symbols. You might wind up owning something on the OTC Bulletin Board.)

Disclosure: Nobody on the staff has a position in any stocks mentioned above, nor do they trade or invest in IPOs. The staff does not issue advice, recommendations or opinions.

Disclaimer: A SCOOP Rating (Wall Street Consensus of Opening-day Premiums), is a general consensus taken, at press time, from Wall Street and investment professionals concerning how well an IPO might perform when it starts trading. The SCOOP Rating does not reflect the opinions of anyone associated with The SCOOP ratings should not be taken as investment advice. The rating merely reflects the opinion of the professionals at the time of publication and is subject to last-minute change.