A view of the New York Stock Exchange (NYSE) can be seen on June 29, 2020 on Wall Street in New York City.
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RedBird Capital believes that an acquisition company that is intended for sports purposes only works – if the company sees a good perspective that it believes can tip over.
RedBird hit the headlines earlier this week when it announced it was filed with the SEC to bring a special-purpose vehicle (SPAC), RedBall Acquisition, to the New York Stock Exchange. The private investment firm said it wanted its new company to target sports media real estate, including data analytics companies, but hasn't ruled out trying to buy a sports franchise. However, using SPACs to buy sports can be difficult and has not always been successful in the past.
Andrew Murstein, President and COO of Medallion Financial Corp., tried unsuccessfully in 2008 to buy the Chicago Cubs and Florida Panthers with his SPAC.
A SPAC, also known as a blank check company, is created to raise capital through an IPO to acquire existing companies. Landcadia Holdings II by Tilman Fertitta, owner of DraftKings and Houston Rockets, has listed used blank check companies on the stock exchange this year. Blank check companies have no operational history, no impact on the stock market and do not reflect market activity.
RedBird founder and sports power player Gerry Cardinale is now taking part in the "SPAC Festival". Here's what you need to know about his plans.
SPACs and sports
In the past, blank check companies were sometimes associated with fraudulent activities such as manipulating penny stocks in 1988. Today, however, SPACs are viewed as low-risk and potentially highly rewarded investment vehicles.
Wall Street investors Michael Klein and Bill Ackman were among the most active investors using SPACs this year to raise capital.
The funds are transferred to a two-year trust account. Once a deal is identified, it is presented to investors. Investors can opt out if they disagree with an offer.
"You basically get your money back," said Scott Rosner, director of the Columbia Sports Management Program. "It's safer and you can wait for the pandemic."
And when a deal is closed, investors can also get stock options – options to buy shares in the new company that were bought later. Rosner called the current trend the "SPAC festival" and noted that the number of SPACs has "increased dramatically" since the pandemic began.
According to the Wall Street Journal, around $ 12.1 billion in funds have been raised with blank check companies so far in 2020.
"For SPACs, the market environment in general is now really great," Suzanne Shank, CEO of Siebert Williams Shank and underwriter at Ackman & # 39; s SPAC, told CNBC's "Squawk Box" on July 22. "Financial investors have significant liquidity, the interest rates are low. The low valuations of public stock markets are higher than ever.
"The number of public companies available has been declining steadily, and the Covid pandemic has apparently challenged the financial condition of the vast majority of companies," she added. "All of these factors offer tremendous opportunities for a great sponsor, the right sponsor, to make a deal."
Mark Patricof, founder and CEO of Patricof Co., an investment firm that helps athletes invest in private equity – including CC Sabathia, Victor Oladipo, and Venus Williams – said the challenge of SPAC in sports was the two-year period. "It is difficult at this time to close a sports shop.
"There are a handful of examples where (a SPAC) worked, but not a ton," said Patricof, whose company is supported by JP Morgan's Private Equity Group. "I'm not sure why SPAC is the right vehicle for sport, but if some, if someone will find out, I think Gerry would be the right person to do it."
A respected name
Cardinale was a key figure in the creation of Legends Hospitality with the New York Yankees and Dallas Cowboys. His accomplishments include creating the Yankees YES network, improving the NFL's on-site experience before the sale of the RedBird stake, and supporting OneTeam partners alongside the National Football League Players Association.
Cardinale, who recently oversaw an 85% acquisition of the French football team Toulouse Football Club, is advised by Rice, Hadley, Gates and Manuel, the consultancy owned by politicians Condoleezza Rice, Robert Gates and Stephen Hadley.
Gerry Cardinale, managing director of Redbird Capital Partners LLC, is sitting in New York for a photo.
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Due to SEC restrictions, Cardinale is being prevented from commenting, RedBird PR team Gagnier Communications said, as registrations are still pending.
RedBall that would fall under the "RBAC.U" symbol. on the NYSE said it plans to raise $ 500 million with the SPAC. The amount is not enough to currently buy a billion-dollar top major league team, but enough for "medium-sized assets" like a football franchise in the US or abroad.
RedBall could also acquire a variety of sports companies and combine the properties into one company before privatization. And Cardinale could also collect the money as re-use finance for distressed properties looking for capital.
"I would hope they have a handful of goals," said Patricof. "If he can do it in the two-year window, someone like Gerry will find something to buy; I have no doubt."