Elliott Management Corp looks to make inroads in the SPAC craze

Elliott Management Corp., the hedge fund best known for its high-profile shareholder-activist campaigns, is looking to join the sizzling SPAC craze.

The firm, founded by billionaire Paul Singer, has been meeting with bankers about raising more than $1 billion for a special purpose-acquisition company, according to people familiar with the matter. They cautioned the process is at an early stage and plans could change.

Assuming Elliott moves forward, it could use the proceeds to buy a sizable company—potentially worth double-digit billions based on the targets similarly sized blank-check companies have agreed to combine with.

SPACs are empty shells that raise money with the sole purpose of looking for a target to merge with and in the process take public. They have exploded in popularity because they offer a lucrative shortcut to the public markets. So far this year, at least 116 SPACs have raised $35 billion, putting the market on track to blow through last year’s record of over $80 billion, according to SPAC Research. There were 10 new SPACs launched Friday alone.

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They often feature big-name investors or celebrity backers such as former Yankees star Alex Rodriguez and ex-House Speaker Paul Ryan. Many of Elliott’s hedge-fund rivals already have raised their own SPACs but Elliott, an inveterate deal maker, had been a notable absence from the party.

It isn’t clear which industries Elliott might have its sights on. SPACs typically give investors an idea of the type of company they might target, but can easily change course.

Elliott, with roughly $42 billion under management, has run campaigns at companies as diverse as AT&T Inc. and Marathon Petroleum Corp. MPC  in recent years. Its private-equity affiliate, Evergreen Coast Capital, focuses on technology, having previously participated in the acquisitions of health-care software firm Athenahealth Inc. and business-software company LogMeIn Inc. Elliott also bought bookseller Barnes & Noble Inc. in 2019.

Other activists with SPACs already hunting for targets include Jeffrey Smith’s Starboard Value LP and William Ackman’s Pershing Square Capital Management LP. Mr. Ackman’s vehicle, Pershing Square Tontine Holdings Ltd.  raised $4 billion last summer, making it by far the largest SPAC ever and setting him up to potentially land a very large target. SPACs often raise additional funds in conjunction with a deal, known as a private investment in public equity, or PIPE, which can send deal values even higher.

Of the hundreds of SPACs raised in recent history, only 12 have raised proceeds of more than $1 billion, according to data provider SPACInsider. Smaller vehicles can look at a bigger universe of targets and can always raise additional financing through a PIPE, SPACInsider founder Kristi Marvin said. “The argument for the larger SPAC is that it’s easier to negotiate with a company if the money has already been raised,” she said.

The largest SPAC deal in 2020 took mortgage originator United Wholesale Mortgage public at a valuation of roughly $16 billion, and was followed by a $12.5 billion deal to merge two investment firms — Owl Rock Capital Partners LP and Dyal Capital Partners—and take them public simultaneously.