A pair of special-purpose acquisition companies backed by private equity firm TPG are looking to raise a combined $800 million through initial public offerings, the latest actions amid a surge in activity for this type of investment vehicle.
The SPACs disclosed their plans in IPO filings with the U.S. Securities and Exchange Commission dated Sept. 3. One will focus on environmental, social and governance principles, and the other on technology.
The filings call for raising $350 million for TPG Pace Beneficial Finance Corp. through the sale of 35 million units at $10 each, and $450 million for TPG Pace Tech Opportunities Corp. from selling 45 million units at $10 each.
TPG’s ESG SPAC disclosed that its units will be made up of a Class A common share and one-fifth of a warrant, which confers the right to purchase shares at $11.50 each. The tech SPAC said it will offer the same terms.
Underwriters will have a 45-day window to buy up to 5.25 million additional units in the ESG SPAC, which the company said would bring its potential proceeds up to $402.5 million. Similarly, the tech SPAC said its underwriters will have a 45-day window to buy up to 6.75 million units, noting it would bump up the total proceeds to $517.5 million.
A SPAC, which is also called a blank-check company, seeks to raise capital from investors with the intention of merging with an operating company, thereby taking the target entity public. Issuance for the investment vehicle has soared, data from SPAC Research shows, with $34.4 billion raised and 86 IPOs so far this year. The activity surpasses $13.6 billion raised and 59 IPOs for all of 2019, SPAC Research’s website shows.
The companies, whose sponsors are affiliates of TPG, said the private equity firm will purchase shares and warrants from them prior to their IPOs pursuant to forward purchase agreements. Both SPACs said their agreements call for TPG to pay $50 million. Additionally, the ESG SPAC said it could enter into another deal with TPG, along with others, that would also be for $50 million. The tech SPAC said it could also enter into an additional deal with TPG, plus others, which would be for $100 million.
The ESG SPAC said it will seek to have its units listed on the New York Stock Exchange under the ticker symbol TPGY.U. The company added that it plans to subsequently have its shares and warrants listed separately on the NYSE, which would happen up to 52 days after it filed its prospectus. The shares would have the ticker symbol TPGY and the warrants would have the ticker symbol TPGY WS, the company said.
The tech SPAC also said it is seeking an NYSE listing for the units, which would have the ticker symbol PACE.U, and that standalone trading of shares and warrants would also be up to 52 days following its prospectus filing. The company said its shares would trade under the ticker symbol PACE, while its warrants would trade under the ticker symbol PACE WS.
The ESG company, in its filing, said it will eye one or more companies for merging, noting that it will pursue targets that “have ESG characteristics which will allow our capital and shareholder leadership to help create a positive impact.”
The SPAC said it will consider targets that have good fundamentals but are presently underperforming. It also plans to use TPG’s Y Analytics, which it said offers impact assessments related to ESG.
The company asserted that ESG already significantly influences how TPG makes investment decisions.
“Ensuring positive ESG outcomes is a central tenet of how and why TPG invests,” the SPAC’s filing said. “Accordingly, all of the firm’s senior investment professionals consider ESG impacts alongside financial returns throughout all phases of the investment process.”
The tech SPAC, meanwhile, noted that its criteria do not confine it solely to the space, stating that its targets “are in the technology, media or business services sectors and can utilize the extensive networks and strategic insights we have built in those sectors.”
The company, which left open the possibility that it could merge with more than one business, touted TPG’s history of investing in tech companies, such as Spotify, Uber, Airbnb, Survey Monkey and Vertafore.
“We believe there is a significant backlog of technology companies that are both looking to go public and that are interested in leveraging the benefits of a SPAC to make that transition,” the tech SPAC said.
“Many technology companies have complex stories to communicate to investors that need help explaining their business opportunity, unit economics, and long-term prospects to investors,” it said. “Additionally, we believe many technology companies that want to be public need additional hands-on help in preparing for that transition, including the right people, systems, and processes to ensure the company can function in the public domain – forecasting, financial reporting and an expert investor outreach function.”
Both SPACs disclosed that they will have the same underwriters, which include TPG Capital BD LLC, a TPG affiliate, as well as JPMorgan Chase, Barclays, Deutsche Bank, Northland Capital Markets and Siebert Williams Shank.