SPAC creators have come under fire for attracting investors then quickly selling shares. A new blank-check firm aims to change that. EG Acquisition, a SPAC backed by two longtime investors, said Monday that it aims to raise $250 million and will feature a three-year lock-up on sponsor equity. That is the longest lock-up yet in the recent SPAC craze, according to Kristi Marvin of data provider SPACInsider. It is three times the typical 12-month lock-up, which usually includes the possibility of early release if the shares trade particularly well. The new SPAC has no such provision, meaning its sponsors won’t be able to sell any shares until a full 36 months after it closes a deal. SPAC creators like venture capitalist Chamath Palihapitiya have been criticized for making lofty projections to investors when they take companies public, then selling shares before those targets are met. Such rosy projections aren’t allowed in traditional IPOs. Critics say that SPAC creators, called sponsors, make huge returns while sticking individual investors with losses even if blank-check mergers turn out poorly. EG Acquisition’s lock-up aims to better align the SPAC’s interests with those of the company and long-term investors, an idea that some analysts have proposed to strengthen the blank-check company structure. A few other SPACs have already made similar changes. Hedge-fund titan William Ackman and other Pershing Square Tontine Holdings executives are paying more for a smaller portion of its shares rather than taking the typical 20% cut. That should make them more focused on profiting from the company’s performance, rather than the transaction, analysts say. EG Acquisition is backed by an affiliate of the $19 billion investment firm EnTrust Global and former Glencore executive Gary Fegel’s investment firm. EnTrust’s founder Gregg Hymowitz is known for helping fund some of activist investors’ biggest bets, including those of Daniel Loeb and Nelson Peltz. The new SPAC is also notable because four of its seven officers and directors are women, a rarity among blank-check firms that are nearly all run by men. Still, it is launching at a time when investor enthusiasm for SPACs appears to be fading. Just three SPACs have raised money and begun trading since March 26. A few weeks ago, an average of five new blank-check firms per business day were being created. EG’s sponsors are betting that a few tweaks were just what investors wanted. |