Liberty Media Acquisition Corporation, the special purpose acquisition corporation of Liberty Media Corp. raised $575 million in its Jan. 22 initial offering on the Nasdaq exchange, the company announced Tuesday (Jan. 26). Liberty Media Corp. owns a majority of SiriusXM and about a third of Live Nation.
Trading under LMACU, Liberty’s SPAC will “identify, acquire and operate” a business with “attractive risk-adjusted returns” within Liberty’s comfort zone: “digital media, media, music, entertainment, communications, telecommunications and technology industries,” according to the prospectus filed with the SEC on Jan. 21.
Liberty Media Acquisition Corp. is headed by Liberty Media’s president and CEO Greg Maffei, a well-connected executive who is chairman of the board for three Liberty Media holdings: concert promoter Live Nation, satellite radio company SiriusXM and online travel company TripAdvisor. Other C-level Liberty executives are also part of the Liberty Media Acquisition Corp. management team.
Once the Liberty SPAC acquires and absorbs a startup — through what’s commonly referred to as a reverse merger — Liberty is expected to operate the new company as a publicly traded business with the expertise it has developed running its expansive portfolio of companies that includes pay-TV channel Starz, the Atlanta Braves baseball team, Formula 1 and cable operator Charter Communications, among others. Essentially, investors are now buying into Liberty’s management ability — not any specific product, since the SPAC target has not yet been identified.
Liberty’s Formula One Group is the SPAC’s sponsor and provided its initial funding while the equity will be held in escrow.
Private companies like SPACs for going public without the cost, regulations and scrutiny of a traditional IPO. They allow everyday investors to own equity in high-growth startups that are normally available only to venture capital and private equity firms. That’s because a SPAC is a “blank check” corporation, a shell company that raises money through an IPO and uses the proceeds to buy a private company. An investor doesn’t know which company will eventually be acquired. Instead, investors back a SPAC based on the experience and expertise of its founders. Lacking a clear ending hasn’t discouraged IPO investors: the number of SPAC IPOs rose from 59 in 2019 to 248 in 2020, according to SPACInsider. Another 76 SPACs have gone public in the first 26 days of January.
Regardless of the target’s industry, a SPAC has one important thing in common with the traditional IPO, says Paul Bernstein, vice chair of Venable’s Entertainment and Media Group, who counsels entertainment clients on acquisitions and capital raises. “You look for the same thing in any company that’s going to go public: growth.”