Fifth Wall, now the most prominent built-world VC firm on the planet (leading capital deployment in this startup niche), just announced a more than half-billion dollar SPAC deal (a backdoor IPO) as a year-end rush to sure up cash catalyzed a record-breaking monthly SPAC liquidation (70+ SPAC's returning cash to investors).
The SPAC Story
The race to raise public capital on the frothy exchange-traded markets catalyzed an unprecedented SPAC tidal wave – 613 special-purpose acquisition company (SPAC) IPO’ed in 2021 for the sole purpose of bringing another business, usually, an underdeveloped tech startup too green for the traditional investment bank approved IPO route, to the public market.
WeWork’s pre-IPO valuation collapse - which went from a $47B private company to a less than $10B failed IPO overnight after investment bankers assessed this overleveraged property management business - provides the perfect illustration of why market-supporting IB due diligence should be required before any public offering. The retail investor cohort does not know how (nor has the time) to properly value a business, which is why investment banks exist, to ensure that IPOs are fairly priced so amateur investors don’t get crushed.
The democratization of the public markets drove retail investors/traders into this market with a thirst for bleeding-edge tech, which many of these SPACs brought to the public domain prematurely – including built world digital twin innovator Matterport (MTTR), which remains years away from profitability and has lost over 92% of its value from the post-SPAC merger high it touched at the end of 2021.
Founders were climbing over each other to get their startups listed (agnostic of stage). With rates near 0%, equity valuations skyrocketing to levels not seen since the dotcom bubble over 2-decades prior, opening up a transient door for a big payday for those who managed to exit in time – these startups ranged from indefinitely unprofitable, to even pre-revenue concept companies in some extreme cases.
The retail investor-driven valuation upswing strengthening continued to have this confirmation bias effect catalyzing some overzealous FOMO, which drove valuations far past anything rational only to come crashing down in the great correction of 2022.
The S&P 500 closed the year out in bear market territory, marking its worst annual performance in over a decade.
Fifth Wall’s Market Defying End-of-Year SPAC Deal
Today it would seem that the SPAC mania of yesteryear is officially over, with over 70 of these untested back-door IPO shell corporations having liquidated in December, more liquidations than the entire SPAC market has seen in aggregate over its short-lived history.
However, demand for built-world innovations appears to be strong enough to publicly debut Mobile Infrastructure Corp (MIC), a leading digitally-focused parking structure asset owner (44 parking facilities across 22 markets), despite it being one of the lowest valuation environments in recent history.
Fifth Wall’s publicly traded Acquisition Corp (FWAC) III will merge with MIC in Q2 of 2023 under the apropos ticker "BEEP". MIC’s SPAC debut will provide the newly listed company with $276M in cash and value it at ~$550M (assuming current conditions hold).
MIC’s a uniquely attractive offering due to its market-driven monthly recurring revenues, providing it with fixed-income adjacent stability in addition to weekly, daily, and even hourly income strategies that make it a potent hedge against pervasive inflationary pressures. MIC’s highly tenured management team, who tout a combined 40+ years of industry tenure, leverages proven proprietary tech to optimize long-term profitability while implementing sustainable practices in its facilities today (e.g. EV charging stations).
This highly fragmented built world space is ripe for consolidation amid this period of economic restructuring and MIC is well-positioned to lead the value-fueled M&A charge following this anticipated Q2 cash infusion.
Look out for BEEP to hit the public exchanges come spring of this year.
Happy New Year!
Director of Venture Investments