A SPAC Empire Faces a Disastrous Market

Barry Sternlicht’s $1 billion Jaws Mustang got the first extension of the year — but investors are still bolting.

Illustration by II

Illustration by II

As the troubled market for special purpose acquisition companies enters a new year, a $1 billion SPAC helmed by a famous billionaire investor has convinced shareholders to give it another year to clinch a deal. But it doesn’t look like investors are sticking around to see if it happens.

Barry Sternlicht, the real estate and hotel tycoon, garnered a number of big-name investors when he launched five SPACs during the recent bubble, according to SPAC Research. His sixth vehicle was pulled before it ever hit the public markets.

Eventually SPACs — which are essentially boxes full of cash — have to find a company to merge with to survive, and those were hard to find last year. As a result, 109 SPACs that launched in 2021 entered liquidation after not finding a company to merge with in the allotted time — typically 24 months, according to SPAC Insider. This year, other SPACs have struggled to get enough votes to extend that time frame, and several have put off shareholder votes that would allow them to do so. It’s not hard to understand the reluctance: Over the past year, the stocks of SPACs that have managed to do deals have fallen 60 percent.

Sternlicht is among a handful of well-known serial issuers to face the disastrous market for SPACs. The most famous is so-called SPAC King Chamath Palihapitiya, who announced last year that he would liquidate two out of the six SPACs he launched, and those that have managed to do deals are trading below their $10 per share offering price. Former Citigroup banker Michael Klein has launched eight SPACs, four of which are searching for a merger partner, and two of them are trading at $2 or below.

Sternlicht’s Jaws Mustang Acquisition Corp., launched on February 2, 2021, said this week that shareholders voted to give it another year to find a merger partner. It appears to be the first SPAC in 2023 to get that approval.

That said, 98 percent of Jaws Mustang shareholders voted to redeem their shares, according to a regulatory filing. Although it’s not known how they voted, its top five shareholders were Glazer Capital, Aristeia Capital, Marshall Wace, Third Point, and Millennium Management, as of the end of the third quarter — the latest numbers available. (Redeeming shareholders can get $10 per share.)

Sternlicht’s SPACs all have Jaws in their name, and his backing gave them the imprimatur of success. But the two that have managed to do deals saw their shares sink once those deals closed in what’s known as a deSpac.

His first SPAC, Jaws Acquisition Corp. was launched before the big boom got underway — May 14, 2020. It had soared as high as $16 per share by mid-February of 2021 — a 60 percent gain from the $10 IPO price — and the peak of the SPAC market. In June of that year, Jaws merged with Cano Health, and redemptions appear to have been minimal. But soon the stock began its downward trajectory. It now trades around $1.50 per share.

Jaws Spitfire, Sternlicht’s second SPAC, went public in December of 2020 and merged with tech company Velo3D in September of 2021. That has also been a big dud. After trading as high as $12 in October of 2021, the stock is now around $2.50 per share.

Meanwhile, Jaws Hurricane, which went public on June 11 of 2021, has yet to find a partner. Nor has Jaws Juggernaut, which also went public that month.

Jaws Wildcat, which in February of 2021 filed to raise $250 million in an IPO, has not been able to get off the ground even after getting rid of warrants that typically drag down the stock post-deal. The registration was pulled in February of last year.

Sternlicht, whose family office is Jaws Estate Capital, did not return a request for comment.