Research from Water Tower Research, Water Tower Research

Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

Research from Water Tower Research

Equity Research Firm

Thematic (Sector/Industry)

Multiple Countries / Thematic (Sector/Industry)

<h2>KEY HIGHLIGHTS</h2>
<ul>
<li>PIPEs are making a comeback, but at a price.&nbsp;The market appears to have gone back into its shell in the past week with one new IPO priced, no new de-SPAC deals announced, and two new de-SPACs completed since March 23—Tailwind Two’s acquisition of small satellite manufacturer Terran Orbital (LLAP) and First Mark Horizon’s merger with ISP Starry (ISP) with both deals valued around $1.6 billion. While we are continuing to see high redemption rates, PIPEs are becoming more visible again in recent deals. Tailwinds Two saw its deal’s PIPE commitment of ~$51 million remain in place, but the First Mark/Starry (STRY) deal had to do quite a bit of finessing to keep its more sizeable $130 million PIPE by pricing it 25% lower at $7.50. STRY did get an additional $10 million for its trouble, but with an additional 5.7 million shares distributed to the PIPE investors, STRY has lost one quarter of its value in just two days of trading.</li>
<li>SEC cracks down on embellished IBC projections.&nbsp;The experience in the last two years is that presented SPAC IBC deals have proven to be, more often than not, long on hype and short on delivery. The SEC released its long-awaited proposals on March 30 to curb fanciful and projections. The proposed new rules require additional disclosures regarding sponsors, conflicts of interest, target companies, and share dilution. They also require management to validate that their financial projections are reasonably based. The proposals intend to remove safe harbor protection afforded to SPACs from private litigation. The SEC is set to vote to approve the new rules after a 60-day period for public comment.</li>
<li>Asia opens up new exit options for SPAC sponsors.&nbsp;With 610 SPACs struggling to find de-SPAC targets, our SPAC Talk Focus discusses the emergence of a new frontier for SPAC sponsors. The recent opening up of the Asia-Pacific region to SPAC issuers represents a potential challenge to US SPAC hegemony.</li>
</ul>
<h2>SPAC STATISTICS</h2>
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<p>PIPEs are making a comeback, but at a price. The market appears to have gone back into its shell in the past week with one new IPO priced, no new de-SPAC deals announced, and two new de-SPACs completed since March 23—Tailwind Two’s acquisition of small satellite manufacturer Terran Orbital (LLAP) and First Mark Horizon’s merger with ISP Starry (ISP) with both deals valued around $1.6 billion. While we are continuing to see high redemption rates, PIPEs are becoming more visible again in recent deals. Tailwinds Two saw its deal’s PIPE commitment of ~$51 million remain in place, but the First Mark/Starry (STRY) deal had to do quite a bit of finessing to keep its more sizeable $130 million PIPE by pricing it 25% lower at $7.50. STRY did get an additional $10 million for its trouble, but with an additional 5.7 million shares distributed to the PIPE investors, STRY has lost one quarter of its value in just two days of trading.</p>
<h2>DISCLOSURES</h2>
<p>Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.<br><br>WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.<br><br>Dmitry Silversteyn, who is the writer of this report, covers the Chemicals &amp; Materials Technology and BioEconomy sectors for WTR. Mr. Silversteyn and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.<br><br>Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.<br><br>In certain instances, including this report, WTR will write research covering non-clients. Readers should assume that WTR may seek to turn these non-paying companies into paying clients. Likewise, WTR may seek to transform these non-clients into paying clients of it or of its affiliate, which provides services such as presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services of WTR or an affiliate might offer to clients.<br><br>The manner of WTR’s potential research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly written compliance guidelines.<br><br>The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors or agents shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.<br><br>All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.</p>

KEY HIGHLIGHTS

PIPEs are making a comeback, but at a price.&nbsp;The market appears to have gone back into its shell in the past week with one new IPO priced, no new de-SPAC deals announced, and two new de-SPACs completed since March 23—Tailwind Two’s acquisition of small satellite manufacturer Terran Orbital (LLAP) and First Mark Horizon’s merger with ISP Starry (ISP) with both deals valued around $1.6 billion. While we are continuing to see high redemption rates, PIPEs are becoming more visible again in recent deals. Tailwinds Two saw its deal’s PIPE commitment of ~$51 million remain in place, but the First Mark/Starry (STRY) deal had to do quite a bit of finessing to keep its more sizeable $130 million PIPE by pricing it 25% lower at $7.50. STRY did get an additional $10 million for its trouble, but with an additional 5.7 million shares distributed to the PIPE investors, STRY has lost one quarter of its value in just two days of trading.
SEC cracks down on embellished IBC projections.&nbsp;The experience in the last two years is that presented SPAC IBC deals have proven to be, more often than not, long on hype and short on delivery. The SEC released its long-awaited proposals on March 30 to curb fanciful and projections. The proposed new rules require additional disclosures regarding sponsors, conflicts of interest, target companies, and share dilution. They also require management to validate that their financial projections are reasonably based. The proposals intend to remove safe harbor protection afforded to SPACs from private litigation. The SEC is set to vote to approve the new rules after a 60-day period for public comment.
Asia opens up new exit options for SPAC sponsors.&nbsp;With 610 SPACs struggling to find de-SPAC targets, our SPAC Talk Focus discusses the emergence of a new frontier for SPAC sponsors. The recent opening up of the Asia-Pacific region to SPAC issuers represents a potential challenge to US SPAC hegemony.

SPAC STATISTICS


PIPEs are making a comeback, but at a price. The market appears to have gone back into its shell in the past week with one new IPO priced, no new de-SPAC deals announced, and two new de-SPACs completed since March 23—Tailwind Two’s acquisition of small satellite manufacturer Terran Orbital (LLAP) and First Mark Horizon’s merger with ISP Starry (ISP) with both deals valued around $1.6 billion. While we are continuing to see high redemption rates, PIPEs are becoming more visible again in recent deals. Tailwinds Two saw its deal’s PIPE commitment of ~$51 million remain in place, but the First Mark/Starry (STRY) deal had to do quite a bit of finessing to keep its more sizeable $130 million PIPE by pricing it 25% lower at $7.50. STRY did get an additional $10 million for its trouble, but with an additional 5.7 million shares distributed to the PIPE investors, STRY has lost one quarter of its value in just two days of trading.
DISCLOSURES
Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.  WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.  Dmitry Silversteyn, who is the writer of this report, covers the Chemicals &amp; Materials Technology and BioEconomy sectors for WTR. Mr. Silversteyn and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.  Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.  In certain instances, including this report, WTR will write research covering non-clients. Readers should assume that WTR may seek to turn these non-paying companies into paying clients. Likewise, WTR may seek to transform these non-clients into paying clients of it or of its affiliate, which provides services such as presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services of WTR or an affiliate might offer to clients.  The manner of WTR’s potential research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly written compliance guidelines.  The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors or agents shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.  All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.

SPAC Talk - A New Frontier for SPACs: Enter the Dragon