PowerUp Acquisition Purses Video Gaming & Metaverse Targets (NASDAQ: PWUP)

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A quick power-up

PowerUp Acquisition Corp. (NASDAQ: PWUP) raised $ 287.5 million in an IPO at a price of $ 10.00 per share, according to the terms of its latest S-1/A regulatory filing.

SPAC (Special Purpose Acquisition Company) seeks maintain a merger of a company in the interactive media, digital media, sports, entertainment and/or entertainment sectors, with particular emphasis on video games, adjacent games and new metaverse video game companies.

I favor a more ‘punchy’ approach to investing in SPAC and am looking for strong management teams and at least one successful SPAC transaction under their belt.

So, I am looking forward to SPAC Acquisition PowerUp in the near term.

PowerUp has 2 executives leading its sponsor, PowerUp Sponsor LLC.

The sponsor is headed by:

-Executive Chairman, Bruce Hack, formerly Chairman of Technicolor SA and lead actor in the making of Activision Blizzard then Vice-Chairman.

– Chairman and CEO, Jack Tretton, who is President and CEO of Sony Computer Entertainment.

SPAC is the first car in this executive group.

The PowerUp market

According to a 2020 market research report by Grand View Research, the global video game market is estimated at $ 151 billion in 2019 and is expected to reach $ 398 billion by 2027.

This represents an expected CAGR of 12.9% from 2020 to 2027.

The main drivers of this expected growth are increased access to services provided through the Internet, increased consumer demand for more interactive entertainment, and more technological innovations. in the industry.

Also below is a graph of the historical and anticipated future market slope for the U.S. video game market through 2027:

US video game market

US video game market (Grand View Research)

PowerUp SPAC IPO Terms

New York, NY-based PowerUp sold 28.75 million units of Class A stock and warrants at a price of $ 10.00 per unit for gross revenue estimated at $ 287.5 million dollars, excluding count on selling conventional underwriting options.

SPAC has 15 months to complete a merger (initial business combination). If he fails to do so, shareholders may redeem their shares / units for the remaining proceeds of the IPO to be relied upon.

Stock symbols include:

  • Units (PWUPU)

  • Warrants (PWUPW)

  • Common Stock (PWUP)

Founder Shares represent 20% of the total share and comprise Class B Shares.

Sponsor SPAC also purchased 9.76 million warrants at $ 1.50 per private placement warrant. Each Warrant will entitle the Limited Partner to purchase a Class A share average of $ 11.50 per share.

Conditions for SPAC to form an initial business combination include the requirement to purchase one or more businesses equivalent to 80% of SPAC’s net assets and a majority of the votes cast for of the proposed business combination.

SPAC may issue additional parts/units to accomplish the proposed merger. If so, Class B shares will be added to maintain the sponsor’s 20% equity stake.

SPAC is interesting because it is looking to merge a target company with the broader video game industry.

The management of the company has strong industry operational skills and extensive experience in video games and media.

However, the team has no previous experience with SPAC, so there is no track record of success with SPAC.

Investing in a SPAC prior to the announcement of a proposed business combination is a significant investment in SPAC’s senior management, their ability to generate value and their previous track record in performance for shareholders. in SPAC.

Therefore, investing in a SPAC can be compared to investing in a venture capital firm as a limited partner.

The cost of this investment is almost the same, 20% upside down for the SPAC sponsor, but the time frame to determine a significant profit can be much faster, a period of 1-3 years for one SPAC versus 10 or more. years for a typical venture capital fund.

The video game market is expected to grow at a substantial rate of growth over the next few years, even if the marketing share of the business undergoes significant changes due to changes in advertising policies for major horizontal platforms such as Apple (AAPL) and Google (GOOG) (GOOGL).

These changes, which include stopping the use of individual advertising identifiers, serve to negatively affect the ability of game developers to target potential users, which can increase cost. to get the player.

While management’s track record is impressive and an investment in SPAC may be justified based on this aspect alone, their lack of past experience with SPAC is a significant failure of this opportunity.

With many SPACs pursuing a limited number of high-quality targets, SPACs have done nothing in the overall IPO market in recent years.

I favor a more ‘selective’ approach and am looking for strong management teams and at least one successful SPAC transaction under their belt.

So, I am looking forward to SPAC Acquisition PowerUp in the near term.

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