Madison Avenue has long known that athletes can sell almost
anything. From soda to sneakers to car insurance, consumers eagerly snap up
whatever their favorite sweat-drenched star is pitching.
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Now a growing number of big-name athletes are taking their
talents to Wall Street. Super Bowl-winning quarterbacks like Patrick Mahomes
and Eli Manning, tennis champion Serena Williams and basketball Hall of Famer
Shaquille O’Neal are just a few of the stars lining up to sell SPACs — the
so-called blank-check companies that are surging in popularity as an
alternative way for buzzy startups, often with little or no profits, to go
public.
But they are not just there to draw in dollars; athletes provide
star power that can be a crucial asset when Special Purpose Acquisition Company’s
(SPAC)— special purpose acquisition companies — are courting startups for a
merger deal.
“Certain athletes carry a certain weight that gives them the
ability to generate exposure and create buzz, whether it’s in the sports world
or in the finance world — and so I think that that’s the ultimate motivation
behind a lot of it,” said Ryan Nece, who had a seven-year career as a
linebacker in the National Football League (NFL). Now he is a managing partner
at the investment firm Next Play Capital, which has been approached about
starting a SPAC but has no plans to do so — yet.
SPACs are in a race against the clock from the moment they make
their shares available in an initial public offering. They generally have just
two years to close a deal for a target company, or they must return the money
raised from investors. And with SPACs being formed at a record pace, athletes
can be useful partners when trying to close a deal — or simply getting a foot
in the door.
Last year, 256 special purpose acquisition companies went
public, raising $83 billion from investors, which was more than five times the
record of $15.5 billion in 2019, according to Dealogic, a data provider. The
competition has grown only more heated; 295 SPACs had gone public in 2021,
raising $93 billion and breaking last year’s record in a matter of months.
About one-fifth of the SPACs launched since the start of last
year involved a sports figure or focused on acquiring a sports-related
business, according to the trade publication Sportico, which is keeping tabs on
every new SPAC filing.
Kristi Marvin, founder of SPACinsider, which collects data on
the market, said adding an athlete to a board brought marketing clout. “It’s
really not geared to the retail investor, but it’s geared to getting meetings
with target companies to do deals,” she said.
Consider a $300 million financing deal to complete the merger of
NewHold Investment, a SPAC, with Evolv Technology. It included a number of
hedge funds but also several famous athletes, such as tennis power couple
Steffi Graf and Andre Agassi and soon-to-be Hall of Fame quarterback Peyton
Manning. NewHold’s backers hope that adding star power to the deal will help
attract customers for its crowd-screening technology, which is aimed at
stadiums, arenas and schools, said a person who was briefed on the matter but
not authorized to speak publicly.
Often, an athlete can be added to a SPAC’s board or advisory
committee at little cost to the management group running it. Directors are
usually compensated with shares, and some advisory board positions are unpaid
until a deal gets done.
But some athletes are not content to merely add their names to
someone else’s SPAC.
They include Colin Kaepernick, the former San Francisco 49ers
quarterback, who is trying to raise $287 million for a SPAC with a focus on
social justice, and Alex Rodriguez, a three-time most valuable player who
retired from the New York Yankees in 2016 at Number 4 on the career home run
list.
Rodriguez is chief executive of his own SPAC, Slam Corp, which
he established in February, and may sit on the board of whatever company it
acquires. He said he and his partners had already seen more than 70 potential
targets after raising $500 million.
Raising money through a SPAC allows his investment firm, A-Rod
Corp, to take on opportunities that were out of reach before, he said.
“What has been the barrier for entry for us has been capital —
and this levels out the playing field,” Rodriguez said.
He and his partner in Slam Corp, hedge fund manager Himanshu
Gulati, are looking to acquire a business in the sports, media or health and
wellness industry — but not a sports team, he said. (Rodriguez was also an
investor in the telehealth company Hims and Hers, which went public in a SPAC
transaction valuing the firm at $1.6 billion last year.)
Forest Road, an investment firm, was the entry point for O’Neal,
who was already an investor there when he contacted its chief executive,
Zachary Tarica, about getting involved in its growing SPAC business. O’Neal was
an adviser on its first SPAC, which last month announced plans to buy
Beachbody, a digital fitness company, at a $2.9 billion valuation. He is now an
adviser on a second Forest SPAC.
Kevin Mayer, a former Walt Disney and TikTok executive who
advised the first SPAC and is helping lead the second, described O’Neal as “a
real businessman,” although he cautioned against investing in a particular
venture just because a famous person was involved.
“If anyone were to ask me, I say you should definitely not
invest in this SPAC because there’s a sports star or any single person,” he
said. “They should look at the totality of the investment.”
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