An Introduction to the Pioneer Merger Corporation (NASDAQ: PACX)
The world of SPACs has a number of different offerings, ranging from the extremely trustworthy to the somewhat shady. The PACX SPAC is at the far end of the extremely safe and reputable spectrum.
Bringing with it some of the biggest celebrity names in the rapidly growing tech sector. And one of the most prolific asset managers on the planet, the Pioneer Merger Corporation is set to make waves with its announcements.
Entering the open markets in December 2020, filing for a $350 million IPO already left the company in the Big leagues. Later ending its run with a significantly larger $403 million (due to sponsor share purchase rights).
Listing the standard $10 units, these consist of the standard share alongside a one third redeemable warrant. An extremely attractive purchase during any stage of the pre-combination. The PACX has currently been trading at some very attractive near-NAV prices.
Regardless of buying or not, the tale of the Pioneer Merger Corporation is one you will not want to miss.
Sponsor Analysis & Context
The listed sponsor is Pioneer Merger Sponsor LLC, a close affiliate of both Falcon Edge Capital and Patriot Global Management. It should be noted that Patriot Global was formed by Jonathan Christodoro (PACX SPAC Chairman) in 2018 and is a close “subsidiary” of Falcon Edge Capital.
The sole underwriter of the transaction is Citigroup. For the sum of $403 million, not surprising consdering the Team, Sponsor and potential targets.
Founded in 2012, Falcon Edge is a truly global alternative asset manager. Expanded to all corners of the world, operating out of offices in New York, Miami, London, Bangalore, and Abu Dhabi. A truly global reach, the firm was founded by Rick Gerson(PACX SPAC Co-President), Navroz Udwadia and Ryan Khoury(PACX SPAC CEO).
The company has a wide array of investment strategies across a number of highly diverse companies ranging from strategic partnerships, co-investments, multi-asset acquisitions and even venture capitalism. In relation to its VC behaviour, the company prides itself on growth-stage companies and seeks a long-lasting relationship.
This has culminated in the creation of the highly successful Alpha Wave Incubation fund. With a sizeable value of around $300 million, this Venture Capital fund has already made 4 dedicated investments ranging from $5 to $40 million in value, primarily in Series A rounds. However, the fund has shown interest in around over 12 companies.
It is clear to see that Falcon Edge has identified larger and more potent targets from around the world and the decision to enter the lucrative SPAC sector was a natural conclusion.
Sitting as the Chairman of the PACX SPAC, Mr Christodoro maintains a close working relationships with Falcon Edge Capital. Entering into a joint venture with the sponsor and establishing Patriot Global Management, where he serves as CIO and President since its conception in 2018.
Prior to that, Mr Christodoro sat as Managing Director of Icahn Capital from 2012 till 2017, overseeing a number of investment and research-related decisions. Beginning his career at Morgan Stanley with a clear focus on M&A transactions. Mr Christodoro currently serves on a number of boards of highly prolific companies:
Having previously sat on the boards of:
Sitting as Co-President of the PACX SPAC. Mr Salazar brings an impressive history with him. Currently operating as an advisor to a number of private equity firms as well as individual executives across the US, Europe and Latin America. Mr Salazar primarily manages a number of direct investments (primarily in private companies) through his family office.
However, from 2014 till 2019, Mr Salazar was both the Co-Founder and CTO of Pager, a New York-based healthcare company. Previously, Mr Salazar was both a Founding Architect and CTO of Uber Technologies.
An unbelievable level of experience in the technology and business service sectors. The sheer professional contribution that Mr Salazar brings to the PACX SPAC has many investors interested.
Currently sitting as President of a multi-billion dollar family office, Tarsadia Investments. Mr Caplan also sat as the CEO of Jefferson National, a tech-based tax-related investment solution provider. Mr Caplan also maintained an 8-year tenure (2000-2008) at the world-renown E*Trade. This electronic trading platform for securities absolutely skyrocketed under his guidance.
Currently serving as the chairman of Kadenwood. These kinds of rapid CBD consumer-based companies are set to dominate the financial markets and send rippling effects throughout. Prior to this, he served as the Co-Founder, CEO and Chairman of LifeLock. In a period spanning from 2005-2016, Mr Davis led the identify-theft protection company to new heights.
Starting the company in 2005 util an IPO in 2012 and an NYSE listing. Ultimately selling the company for a whopping $2.3 billion to the world-famous anti-virus provider, Symatec. Currently, Mr Davis sits across a number of different boards, primarily private and philanthropic. Utilizing his experience with marketing, technology and team building to assist early-stage companies and scale them appropriately.
Targeted Market Sector & Criteria
It is clear to see that both the Sponsor and the assembled team maintain an incredible level of deal flow and experience across a wide range of technology subsectors. However, the Trust in excess of $400 million highlights a clear indication of a Tech Unicorn. An extremely popular brand of Unicorn, more refined criteria is required.
The PACX SPAC has highlighted two important aspects when seeking a target. The flexibility of a mandate and a long-partnership approach. These are highly attractive qualities in a SPAC to any likely target. The freedom and flexibility that the company is offering are certainly in demand.
However, the PACX SPAC isn’t about making friends. It’s acquisition criteria requires a clear outline for a monetization model, actively seeking returns on invested capital. This lessens the period before shares start paying out, post combination.
Thereafter, the PACX SPAC is focusing on a sector with a high barrier of entry. This indicates a niche field that requires high relative scale and market share, low relative cost position, strong brand perception, process and technological excellence.
Considering the ability of these tech-related companies to address untapped markets and scale with relative ease. The potential targets of the PACX SPAC seem like extremely quality targets.
Post Deal Value
Currently managing over $4 Billion in assets through a wide array of mediums. Falcon Edge has been in the VC industry since 2014 and has raised around $2 Billion in capital. Some of the most notable investments of the company include SpaceX, Ant Financial, Ola, Alibaba, Uber and Lyft.
The sheer brand power of the affixed sponsor should be enough to generate post deal value and the attachment of celebrity-status tech icons, further compounds that.
The sheer amount of prime Unicorns across the sector should guarantee a huge upswing in share price Post Deal, alongside some of the quality Target criteria stipulations (primarily the requirement for a clear monetization model) further adds to solidify investor faith and ensure the PACX SPAC seem like a quality investment.
Deal Flow Analysis
The sheer level of deal flow through an international asset fund such as Falcon Edge Capital is truly staggering. The company has investments across the planet ranging from sub-$10 million onwards. The $300 million tech-related Venture fund should also go without saying.
A closer look at the previous U.S based investments of Falcon Edge Capital has revealed 34 in total. Of these 34 investments, 21 have Falcon Edge maintaining Lead Investor status. The nature of these investments ranges from $4.5 million (Hippo Video) to $157 million (ATAI Life Sciences) in value.
This wide range of investments from entertainment technology to Life Sciences further highlights the sheer scope that Falcon Edge Capital maintains as an investor. This is further embodied by the company’s clear preference for Series A rounds of funding (obvious due to the sheer capital available), but the fact that Falcon Edge will occasionally invest $100 million in a Series H round (VerSe Innovation).
The following is a list of the company’s most notable investments across its illustrious history:
It should be noted that a number of the stated companies (and many more) are not publically listed. This should further highlight the deal flow available to the PACX SPAC through Falcon Edge Capital.
PACX SPAC In Summary…
There exists very little to critisize of the PACX SPAC. The company brings a very solid team under the banner of an extremely reputable sponsor. With a global reach and the sort of deal flow both these factors bring, the ability to generate value seems guaranteed.
Although it seems reasonably certain that the SPAC combination will result in “Blue Chip Stock,” a glaring issue is the sheer lack of SPAC-related experience. It is true, a large part of the assembled team may have a vast range of experience in business scalability and M&A across the Tech sector, but they are definitely new to the SPAC industry. As to whether that shall become an issue remains to be seen.
However, it takes more than this to shake investor faith. Bringing an impressively sized Blank Check and some huge star power to the Tech sector, eagerly seeking a Unicorn set to burst. Will it be based in the U.S or even internationally? There exist much mystery and uncertainty regarding potential targets. Regardless, the Pioneer Merger Corporation may be pioneering but it certainly is well prepared!