Over the past five years, there has been a wild surge of companies going public through blank cheque companies. In this mechanism, a special purpose acquisition company (SPAC) merges with a private firm to launch an initial public offering (IPO). ReNew Power, one of India’s large renewable energy companies, has merged with US-based RMG Acquisition Corporation II, led by Robert Mancini.
In the $8 billion deal, Renew Energy will join NASDAQ as a public company, allowing investors to trade their shares in the company. The acquisition has already attracted funding from BlackRock and former Facebook executive Chamath Palihapitiya, who recently sold his stake in Virgin Galactic. SPACs are the new hot item in the stock trading world and have gained a lot of popularity. In 2020, financial analysts estimated that these blank cheque companies raised more than $80 billion, making them one of Wall Street’s hottest products. SPACs raise funds through investors, list on a stock market, then merge with a private company.
The surge in blank cheque companies has attracted criticism from experts. They claim that SPACs favor the founders at the expense of the public and the merging private entity. However, those supporting them note that they revive companies from bankruptcy and support startups to grow fast.
ReNew has renewable energy projects across 80 cities in India. The Asian country has over thirty startups seeking to go public with international SPACs. The deals are estimated to be at $1billion.These companies include Delhivery, Zomato, and Policy bazaar. As Indian firms tap into the SPAC craze, American blank cheque companies seem to have found the right fit in the Asian market.
RMG approached the solar and onshore wind giant for the deal. “We were approached, and when we looked at it, it seemed to make a lot of sense. The process went very fast. Environmental, Social, and Governance (ESG) listings are now a much bigger theme outside of India,” said Sumant Sinha, ReNew Power chief executive officer. “Several Indian companies were looking to go public via a SPAC,” said Raj Balakrishnan, head of India Investment banking at Bank of America. Bank of America advised RMG Acquisition on the merger deal. Raj also revealed he was working on several SPAC transactions valued between $200 million to $1 billion.
“If the company is already registered outside India, it becomes extremely simple to do a SPAC transaction because it is conceptually no different from a SPAC transaction taking place anywhere in the world. It is a big opportunity for Indian companies seeking to access capital markets,” added Raj. According to a mergers and acquisition lawyer, Akila Agrawal, SPACs are a hot subject matter. The attorney, who is the head of merger and acquisitions at Cyril AmarChand Mangaldas, revealed she is advising clients on several blank check acquisition deals.
“These SPACs in the US are now sitting on so much cash, emerging markets like India provide targets. SPACs are seen as an easier route to listing itself overseas; listing is a tedious process,” added Agrawal.