An Introduction to the Altimeter Growth (Nasdaq: AGC) Corporation
The SPAC world is filled with contenders, some more legitimate than others. But the reasonably new financial tool is shifting constantly and the AGC SPAC marks the beginning of that evolution.
Looking to enter the tech sector with a substantial IPO of $450 million, the tradition unit pricing of $10 hit the open markets on September 30th 2020. The excitement around the company led to an extremely successful early performance, long before any talks of a deal.
It is hard to pinpoint the reasoning behind the drop in share price of the AGC, considering how successful the company was doing previously. But what sets the IPO above most SPAC offerings?
Well, the SPAC units consisted of a mere one-fifth of a warrant not to mention a Class A share priced at $11.50.
So what exactly does this mean for the potential investor? What does this mean for the SPAC industry at large?
The newest Acquisition company from Altimeter and Brad Gerstner actually IPO’d without any warrants! The Altimeter Growth Corporation really is rewriting the history books.
Sponsor Analysis & Context
The listed sponsor is Altimeter Growth Holdings, maintaining a close relationship with Altimeter Capital Management LP. The joint bookrunners behind the AGC SPAC are Citigroup, Goldman Sachs and Morgan Stanley. That is a ridiculous assembly of underwriters, big names for sure but why split the $450 million risk between so many bookrunners?
One of the most successful Venture Capitalists in the industry right now. Mr Brad Gerstner is the Chairman, CEO and President of the AGC SPAC. Having founded the sponsor, Altimeter, in 2008. The company maintained a tech focused vision where he currently sits as CEO.
Mr Gerstner was a founding principal at General Catalyst and PAR Capital prior to founding his own VC firm. It was at these companies that he spearheaded technology and internet investments. It is hard to agree that the sheer amount of experience that Brad Gerstner brings to the table as an investor is truly remarkable. His involvement alone sways most investors.
The sheer deal flow available through Mr Gerstner alone is truly staggering. Having entered the technology sector and dominating it since the industry truly started to blossom into the modern age. There are very few people more capable than Brad Gerstner.
Altimeter Capital Management
Altimeter Capital Management was established in 2008 by Brad Gerstner. The Silicon Valley-based VC has a strong focus on the technology sector and currently maintains over $6 Billion in assets under management. The company certainly has some very exciting ventures to its name and has been known to hold some very interesting positions.
The sheer amount of highly successful companies that Alitimeter has had a direct hand in is truly staggering. It was only natural that a company so well-versed with investing in the Tech sector and guiding fledgling companies through the tedious IPO process should enter the SPAC sector.
The firm maintains a strong interest throughout the many stages of a company from early to late stage and has a strong preference for the following tech-services:
- data backup and recovery
- B2B trade platforms
- tracking software
- distribution services
Board of Directors
The current Director the AGC SPAC. Simultaneously maintaining a position as the Chief Compliance Officer at the parent sponsor, Altimeter. Previously, Mr Siam served in both the private and governmental sector.
An extended tenure as the Financial Services Counsel for Congressman Robert Dold (Illinois 10th district). As well as serving as Corporate Secretary at NextG Networks Inc. Beginning his career as a Corporate lawyer at Wilson Sonsini Goodrich & Rosati and Kirkland & Ellis.
Although his networking and deal flow may be lacking, Mr Siams close relation with Altimeter and experience with the technical innerworkings of various financial instruments make him a solid addition to the team.
Mr Barton has a highly varied level of experience across a number of different companies through multiple sectors. His most recognizable is as the Co-Founder and CEO of the Zillow Group (NASDAQ: Z). Sitting as CEO in multiple stretches since the dawn of the company. This technology-based real-estate company has fared phenomenally since its conception.
However, Mr Barton also maintains a partnership at Benchmark. This extremely successful VC firm specializes in the mobile, marketplaces, social, and infrastructure and enterprise software fields. Primarily an early stage investor, the company has been highly successful since its creation in 1995.
This investment and company creation experience solidifies Rich Barton as a fantastic addition to the AGC SPAC team. However, Mr Barton’s experience prior to this is also extremely impressive and relevant. Having founded Expedia within the Microsoft Corporation in 1994.
Sitting as the President and CEO of the now publically traded Expedia Group (NASDAQ: EXPE) from 1999 to 2003. Also Co-Founding Glassdoor (one of the largest global Job boards) in 2007 and sitting on the board until the company’s acquisition in 2018. As well as sitting on the board of Netflix as of 2002.
Mr Ittycheria currently sits as the President and CEO of MongoDB (NASDAQ: MDB) since 2014. This highly successful company is about as future-proofed as you can get. A database built for modern application developers and for the cloud era.
However, the experience Dev Ittycheria brings when forecasting the future of the technology sector can be seen from his tenure as a Venture Partner at Greylock Partners. Alongside the invaluable time spent as Managing Director at OpenView Venture Partners.
In relation to the technology sector in particular, Mr Dev Ittycheria has sat in a number of both publically and privately traded technology and software companies. The following is a select list:
- BMC Software (President from 2008-2010)
- BladeLogic (Co-founded and CEO later acquired by BMC)
- Datadog, Inc (NASDAQ: DDOG)
- Bazaarvoice (no longer publically listed)
- Athenahealth Inc
- AppDynamics (acquired by Cisco Systems)
Aishetu Fatima Dozie
The Founder and CEO of Bossy Cosmetics Inc. Ms Dozie is a highly accomplished and extremely successful across a number of fields. Culminating in her mission-driven and cruelty-free beauty company. Prior to this venture, Ms Dozie has an extensive history within the banking and investing sector.
Sitting as General Manager and Head of Investment Banking at Rand Merchant Bank (2015-2017). Also holding high-ranking positions with Lehman Brothers, Morgan Stanley and Standard Chartered Bank primarily as an investment banker.
With a strong focus on financing businesses in the manufacturing, infrastructure, and service sectors around the world. Her work maintained clients across Central and South America, Eastern Europe, and Eastern Africa.
Targeted Sector & Market Criteria
Although it is clear to see from the selected team that the Technology sector is in focus. It is important to consider the total valuation and potential enterprise value of a likely candidate, considering the $450 million blank check.
The TMT (Technology, Media, and Telecom) sectors do seem like extremely likely candidates and the due diligence within the Prospectus seem to indicate likewise. With a particular focus on Software and Internet companies that becoming increasingly disruptive to traditional enterprises.
Going on to highlight developments in both artificial intelligence and machine learning, allowing these companies to identify previously unaddressable consumer issues. These companies are also afforded the luxury of unbelievable scalability, due to the public cloud-based platforms.
However, this jarring value creation compounded with the nature of the emergent sector has left a sizeable financial investment gap.
Venture capital deal volumes exceeded $135 billion in 2019, a 394% increase compared to ten years earlier.PitchBook – 2021
This “liquidity” within the sector has been atrributed to the increased popularity of VC firm amongst countless other means of private investments (hedge funds, mutual funds, sovereign wealth funds and corporates). Resulting in these high-growth tech companies remaining private and growing unbelievably high in value.
There were over 480 private technology companies globally with a valuation in excess of $1 billion, for a cumulative valuation of over $1.5 trillion, compared to just 39 such companies in 2013.CBInsights – 2020
These hideously bloated companies will finally enter the public marketplace. But through the means of the AGC SPAC, public investors are afforded the luxury of investing in a private high-growth company before the extended tenure within the private sector.
Deal Flow Analysis
There are fewer SPACs with a more solid deal flow capability than the one seen at the AGC SPAC. Within any sector, the most prime positions for networking and securing deals exist through a Venture Capital firm. With the head of the AGC SPAC and the lead sponsor both being so closely tied to this Acquisition company, there exists little doubt.
Altimeter Growth Corp. 2 (NYSE: ACBG) is the latest venture from Mr Gerstner and Altimeter. This is a fantastic sign for the AGC SPAC. A great indication of the highly successful IPO and of many serious talks occurring behind closed doors for potentially identified targets.
When considering the deal flow of Altimeter Capital Management, the company currently maintains in excess of over $6 billion of assets under management. Since its creation in 2008, the company maintains over 50 investments all throughout the technology industry.
A brief overview reveals a number of late-stage investments, primarily series D onwards, with Altimeter buying large as the lead investor. 13 total exits including a number of highly prolific companies such as Roblox, MongoDB, Unity Technologies and even Uber!
Post Deal Value
Previously, the question of Post Deal Value generation should not even be an issue when considering the solid team and brand power behind the AGC SPAC. However, the recent falter in the share price was surprising to most people.
The involvement of VC celebrities such as Brad Gerstner and his highly reputable firm, Altimeter Capital, leave very little doubt in most investors mind. However, Mr Gerstner is very well known throughout Silicon Valley and has close ties with another highly successfull and world-renown Investor. Mr Chamath Palihapitya.
Mr Paihapitya hardly needs any introduction. Maintaining a large number of both public and private appearances with Mr Brad Gerstner, many would describe their relationship as that of a personal friendship. The selected sectors of both VC firms: Altimeter Growth(Mr Brad Gerstner) and Social Capital (Mr Palihapitya) certainly overlap and could be considered competitors.
There is no mention of Mr Chamath Palihapitya around the AGC SPAC. He is certainly a huge fan of SPACs. How can he get involved?
The usage of a PIPE deal for a SPAC can often be considered a death sentence. This private investment in public equity is often the last resort when looking for a huge cash injection and could lead to a heavy downturn in post-deal value.
However, considering the potential enterprise value and targeted sector of the AGC SPAC. Perhaps the involvement of Mr Palihapitya is more legitimate than a simple pump and dump scheme?
AGC SPAC In Summary…
The AGC SPAC can be considered the template or “Gold Standard” by which to hold all other SPACs. With a solid team behind a fantastic leader and sponsor. There seems to be very little doubt in many investors minds.
Even the pricing and potential of the company after its IPO seems appropriate yet somehow exemplaray, especially when entering the already saturated technology sector.
The heavy dip in share price is nothing to ignore. However, the intentional decision to trade shares at $11.50 upon split with a one-fifth warrant per unit is certainly an interesting one. Compounded further by the Altimeter Growth Corp. 2 (NYSE: ACBG) ignoring warrants completely.
What does this shift in SPAC IPO mean for the sector as a whole?
We can only sit around and speculate. And there seems very little reason to let your money sit elsewhere but the Altimeter Growth Corporation SPAC.