SPAC Bubble Remains Hot: Colin Kaepernick And Private Equity Firm Raising $300M For ‘Social Justice’ SPAC
Political activist, entrepreneur and former San Francisco 49ers quarterback Colin Kaepernick is growing his business portfolio, becoming the latest high-profile athlete to join the booming SPAC industry.
Kaepernick, 33, has teamed up with private equity investor Jahm Najafi, part-owner of the NBA’s Phoenix Suns and the founder of the Phoenix-based Najafi Companies, to form a special purpose acquisition company (SPAC).
He’ll try to bring his social justice causes in the fight against systemic racism to the equity markets as the co-chairman and co-sponsor of Mission Advancement Corp. A social justice-focused SPAC, Mission Advancement hopes to raise close to $300 million. The sponsorship money is coming from Najafi and Kaepernick, who said they intend to acquire an as-yet-unnamed billion-dollar, consumer-focused company with the potential to “generate a positive social impact,” according to an investment prospectus filed with the Securities and Exchange Commission.
Sometimes called “blank-check companies,” SPACs go public as cash shells, raising money without all the paperwork of a traditional initial public offering. Sponsors later identify an operating business to merge with. That business then takes over the SPAC’s stock listing.
In an IPO, a company announces it wants to go public, then discloses a lot of details about its business operations. After that, investors put money into the company in exchange for shares. “A SPAC flips that process around,” NPR reported. “Investors pool their money together first, with no idea what company they’re investing in. The SPAC goes public as a shell company. The required disclosures are easier than those for a regular IPO, because a pile of money doesn’t have any business operations to describe.
SPAC fans say it’s a chance to buy into fast-growing companies that might otherwise remain private. Since the beginning of 2020, SPACs have become one of the hottest asset classes in U.S. equity markets, Financial Times reported. The SPAC business model has also attracted its share of critics, who accuse SPAC business of being opaque.
Critics say SPACs are hardly a new phenomenon and represent an opportunity for someone to sell you empty promises. Historically, they’ve heralded fraud and collapse. Famous bubble companies throughout history were set up for people to invest in “an undertaking of great advantage, but nobody to know what it is,” Merryn Somerset Webb wrote for Financial Times. “My personal favorites include undertakings for ‘paving the streets of London’, ‘importing walnut trees from Virginia, and ‘extracting silver from lead.'”
Mission Advancement said its board of directors is entirely Black people, people of color, Indigenous and majority-female, including Katia Beauchamp, the CEO, and co-founder of Birchbox, and Omar Johnson, a former executive at Apple and Beats by Dre. Advisers include Oscar-nominated filmmaker Ava DuVernay and Silicon Valley investor Ben Horowitz.
Kaepernick started a movement and became a household name after he kneeled on Sept. 1, 2016 during the singing of the national anthem at the final preseason game in protest against police brutality.
Tuesday’s filing mentioned that Kaepernick has had successful partnerships with brands including Nike and Audible. “We believe Mr. Kaepernick’s substantial business experience combined with his long-term leadership on racial equity and justice issues will support our success in identifying a prospective target company and adding transformational value to the combined entity,” the prospectus reads.
Considered the year of the SPAC, 2020 saw 219 “blank-check’ companies raise $73 billion, outpacing traditional IPOs. There was more than one new SPAC IPO launched per day since July 2020, Business Insider reported on Dec. 18, 2020.
Other athletes who have entered the SPAC market include Shaquille O’Neal, who backed Forest Road Acquisition Corp, which announced a deal to take the Beachbody fitness brand public. Former Yankees star Alex Rodriguez filed paperwork last week to raise up to $575 million for a SPAC called Slam Corp. that will seek out a company to merge with in the “sports, media and entertainment, technology, and health and wellness industries,” New York Post reported.
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Kaepernick last played for the NFL in 2016. The movement he started kicked off years of political controversy for the NFL and Kaepernick remained unsigned. He later settled a multimillion-dollar lawsuit with the NFL that alleged the league and its 32 teams colluded to keep him unsigned over his political views, Wall Street Journal reported.
In the past year alone, Kaepernick has entered partnerships with Disney to produce content on social issues he advocates; joined the Medium board of directors; had a vegan Ben & Jerry’s flavor named after him (“Colin Kaepernick’s Change the Whirled”) and launched a Netflix series about his life with Duvernay.
Mission Advancement wants to align with Kaepernick’s socially driven efforts and “advance a company that is addressing systemically consequential issues,” the SEC filing said.