Sports Ventures Acquisition CEO & Chair Alan Kestenbaum said SPACs are a phenomenon right now because of the interest rate environment. Kestenbaum, speaking during SBJ's Dealmakers In Sports virtual event, said, "SPACs become very popular during low interest rate environments. ... So, if you're looking for a fixed income return and the capital, since it's largely placed in the trust, it's guaranteed to come back, you can lever it up significantly." He added, "It provides a very excellent return on a levered basis, almost 9%. So when interest rates go down to where they are today, there is a significant investment community that comes in and funds the SPACs." Kestenbaum, who in '19 became a limited partner of the Falcons, outlined what else in the space has his eye right now: "One category might be platforms for distribution of sports or content. A lot of these companies are founded by companies backed by venture capitalists. ... These businesses generally don't belong in private equity just yet because a lot of them are not making money. And so the founders of these companies very often are forced to take very significant dilution to their own ownerships stakes."
Quick Hits:
- On teams that have had significant revenue losses during the pandemic: "There's going to be a need for capital in some of these teams also. And to the extent the leagues relax some of their existing rules with respect to sources of capital, there might be some opportunities."
- On helping teams with financial issues: "Where there's opportunities specifically right now might be where owners had to write significant checks into the team. ... So to the extent you can plug a hole, help an owner that may not want to write another check next year, I mean, it's right around the corner."
