The founder of 1-800-Flowers.com has raised $287.5 million in a "blank check" initial public offering that he envisions as the first of a series that will bring growing companies to the public markets.
James McCann, who remains chairman of the omni-channel flower and gift business based in Carle Place, said he decided to start a blank-check company — also known as a special purpose acquisition company, or SPAC — after becoming an investor and adviser to several startups.
In some cases, McCann suggested that the companies go public, but they faced unfavorable financial terms.
"I thought a SPAC would be a good alternative," said McCann, of Manhasset. "We wanted to have that arrow in our quiver. I hope we'll do a series of these. It's a nice way to build a portfolio of companies."
On Tuesday, McCann's SPAC, Clarim Acquisition Corp., which began trading on Jan. 29, closed up 0.1% to $10.54 a share.
SPACs are shell companies that raise money by staging an initial public offering with the express purpose of acquiring an existing business. The sponsors of the SPAC, however, do not disclose the targets they are considering.
Another executive with Long Island connections, Jonathan Ledecky, co-owner of the NHL's Islanders, has rolled out four SPACs under the Northern Star Investment banner alone.
One of his Northern Star SPACs acquired Barkbox Inc., a dog toy and treat company, now trading on the New York Stock Exchange under the ticker "BARK."
High profile SPACs also have been fronted by former NBA center Shaquille O'Neal, former Republican House Speaker Paul Ryan and Virgin Group founder Sir Richard Branson.
Anoop Rai, a professor of finance at Hofstra University's Frank G. Zarb School of Business, said investors should be cautious, noting that a standard IPO — where investors know what business they're buying shares in —provides greater transparency.
"It's buyer beware," he said, citing academic research that suggests sponsors who bring the companies to market benefit more than follow-on investors. "How can you ensure that what the company acquires is at a good price? Overall, it's very clear that if you had invested in all the SPACs, you'd not be doing very well."
But McCann said that a standard IPO is a lengthy process and can "misprice" the shares of a company.
Though blank-check companies don't specify a target, a filing by his SPAC with the Securities and Exchange Commission said the company's mission is to provide a path to a public listing for "consumer-facing e-commerce companies."
There is no shortage of companies seeking to go public under the Clarim Acquisition Corp. umbrella, McCann said. "The inbox is filling up. It's a rich field of opportunity."
SPACs in Short
Special purpose acquisition companies — SPACs — raise money through an initial public offering on a stock exchange.
The SPAC — also known as a blank-check company — is a shell company that has 24 months after the IPO to acquire an operating company.
If no acquisition is made, the SPAC unwinds and returns the funds to the investors.