Hong Kong - Recently, TickerWin, the leading market research firm, has released a research report " VIYI Algorithm Will Go Public Through SPAC Before the End of the Year, While Business Giants Are Scrambling to Form SPAC ". During the bull market in the U.S. stock market, SPAC is still hot and business giants are rushing to set up SPAC, this year is Li Richard IPO,son of Li Ka-shing. Last month, Li's insurance company submitted a listing application on the New York Stock Exchange. At the mean time, Hyphen Group, another fintech firm invested by him had news of a listing. People from Bloomberg said that Hyphen was discussing a merger with SPAC called Provident Acquisition Corp in a U. S. listing of SPAC at a US $1 billion valuation.

Richard Li is arguably a SPAC fan, creating a series of SPAC. As early as last October, Li Richard and Peter Thiel, co-founder of PayPal, early Facebook investor, jointly established the SPAC company Bridgetown Holdings (listed code BTNC), which was listed on the Nasdaq with a fundraising scale of US $550 million.

Subsequently, they took advantage of the hot iron and established more Bridgetown series of SPAC companies, including Bridgetown 2 Holdings (listed code BTNB) and Bridgetown 3 Holdings (listed code BTNC). In July, the Singapore real estate portal PropertyGuru announced its merger with Bridgetown 2 Holdings and will be listed on the Nasdaq in the form of SPAC.

Bridgetown Holdings has not yet determined the target of the merger. In September, Indonesian online travel giant Traveloka said that it would terminate the merger with Bridgetown Holdings and gave up listing through SPAC. Coincidentally, the Indonesian Winato in Provident, which merged with Hyphen, also invested in Traveloka.

Why is Richard Li a SPAC fan?

SPAC appeared in the 1990s. It is an investment tool whose sole purpose of raising funds is to merge private companies and go public. SPAC is a Special Purpose Acquisition Company. This kind of company does not deal with business. The company's assets are all cash. After the company applies for listing, it finds a high-quality company within a short period of time, and then merges with this company to quickly become a listed company.

After the listing of SPAC, the funds raised by it will be placed in a trust account and the management or promoters of the SPAC will need to find an acquisition target. This is also one of the ways for private companies to enter the stock market through acquisitions.

However, not all SPACs can complete the acquisition. Generally speaking, the management has two years to find the target company. If the acquisition goal is not achieved within the specified time, the trust account will be canceled and the funds will be returned to investors.

After SPAC determines the acquisition target, it will issue an announcement and complete the business combination. Once the transaction is completed, SPAC will cease to exist, and the combined company will be traded under the new stock symbol.

At present, the form of SPAC is gradually being widely accepted by the market and its development is becoming more mature. The average size of SPAC in 2020 has increased, and many large SPACs are also operated by mature PE institutions.

The specific process of SPAC is as follows:

  1. The establishment and listing of SPAC;

  2. Look for target companies;

  3. Complete the merger;

  4. The new enterprise succeeded the listing of SPAC.

Compared with the traditional IPO listing, this method is still attractive to specific industrial companies. The main reasons are: firstly, the listing time is short and the listing can be completed quickly; secondly, For the issue price of new shares, the entity company only needs to negotiate with the SPAC management. Both parties are satisfied. In traditional IPOs, brokerages generally depress the company's stock price as much as possible for the convenience of stock issuance.

Wall Street seeks to let more companies go public through SPAC

In the environment of the bull market in U.S. stocks, Wall Street giants are also seeking to let more private companies go public through SPAC. According to data from SPAC Research: In 2020, the number of IPOs in the U.S. market reached 248, with a total fundraising of US $83.4 billion, and an average IPO size of US $336 million; since 2021, the number of IPOs has reached 429, with a total fundraising of US $124.6 billion. The average IPO size is US $314 million. From the perspective of the proportion of the total SPAC IPO funds raised in the overall US IPO market, it reached a record 46% in 2020, and it has also accounted for 44% since 2021.

In terms of the direction of use of the funds raised, that is, the industry selection of the target company for the merger and acquisition, comparing 2020-2021, it can be seen that, in addition to the "comprehensive" category where the details are not clearly disclosed, "technology", "finance", "health" and "consumption" category ranks in the forefront, which has a large overlap with the current hot industry of PE funds, reflecting the characteristics of the industry with high expectations. From the perspective of subdivisions, healthcare and financial technology still account for a large proportion, but artificial intelligence (autonomous vehicles and algorithms) is attracting more and more investors' attention.

According to domestic and foreign media reports, in addition to the many SPACs that have already been listed, there are currently at least several artificial intelligence-related SPACs applying for listing. According to the SEC documents, the main acquisition targets of these SPACs are companies with autonomous driving and AI algorithms.

In the fourth quarter, two companies in the AI field went public through SPAC.

In the fourth quarter of this year, Aurora, an American driverless start-up company, and VIYI Algorithm, a central processing unit algorithm service provider, will go public through SPAC.

According to data, Aurora was founded in 2016 and is an autonomous driving technology developer focusing on building a complete autonomous driving stack. It is reported that Aurora has received more than US $2.2 billion in financing in the four years after its establishment, and plans to merge with SPAC at the end of 2021 and go public on the Nasdaq. After the completion of the listing, the valuation is expected to reach US $13 billion, and the new company after the merger will be named Aurora Innovation Inc. with the stock code "AUR". Aurora has successfully developed a self-driving car using its own self-driving technology, but the car is in the testing phase and has not been sold on the market.

VIYI Algorithm is a leading central processing unit algorithm company. It is a subsidiary of WIMI.US, a Nasdaq-listed company, and plans to merge with Venus Acquisition Corporation, a special purpose acquisition company (SPAC) in the fourth quarter. After the completion of the listing, the valuation of VIYI Algorithm is US $400 million. The new company after the merger will be named MicroAlgo Inc. From the prospectus of the VIYI algorithm, it is dedicated to the development and application of bespoke central processing algorithms. VIYI provides comprehensive solutions to customers by integrating central processing algorithms with software or hardware, or both, thereby helping them increase the number of customers, improve end-user satisfaction, achieve direct cost savings, reduce power consumption, and achieve technical goals. The range of VIYI's services include algorithm optimization, accelerating computing power without the need for hardware upgrades, lightweight data processing, and data intelligence services. 

Compared with companies in the fields of health care and financial technology, there are still fewer artificial intelligence companies that qualify for listing. Wall Street analyst Mike Blankenship believes that there are few privately-owned artificial intelligence companies in the market that can become ideal acquisition targets for SPAC, but with the development of the artificial intelligence industry, he expects that more artificial intelligence-related companies in the future will be listed through SPAC.

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