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February 15, 2011

Getting $150M Is Easier Than We Would Have Guessed

Money for Nothing… Literally

Remember this?

Back when Tom Hicks was on the verge of having creditors sell Liverpool out from under him, we came across that. It’s a share offering for a blank check company.

Basically, Hicks was issuing 15,000,000 shares at $10 a throw for, well, for whatever he felt like. It’s called a SPAC, a Special-purpose acquisition company. And it’s a totally legal way to go to the capital markets and raise funds without yet knowing what acquisition you intend to undertake with said funds.

When we first stumbled across it, we speculated that Hicks might be trying to quickly raise cash to rescue Liverpool.

But we must have missed this bit in the filing:

“We are not limited to a particular industry, geographic region or minimum transaction value for purposes of consummating an initial business combination, except that we will not effect a business combination with another blank check company or a similar type of company with nominal operations or with an entity that is affiliated with our sponsor and engaged in the business of owning or operating a professional sports team as its principal business.”

With Thomas Hicks being the sponsor, they were telling investors that, no, this wouldn’t be for a sports team (or a sports team that he was engaged with at that time… it’s probably a very important difference but not one we care to parse right now).

Still, that’s probably something he should tell people as, having lost both the Texas Rangers and Liverpool FC, he doesn’t have a stellar track record with sports ownership. He does still have the Dallas Stars, but there were reports from as long as a year ago indicating that he was exploring a sale of the team.

Less reported about Hicks is the fact that he was involved with the Brazilian club Corinthians long before his involvement in the EPL (suck it, Barclays). He promised the club a new stadium, but instead sold off its stars and caused an uproar when they announced they were going to change the club’s kit colors before finally leaving without having built much of anything.

Also curious is that the Hicks Sports Group website appears to now be a dead link.

Why bring all this up now?

Well, we had completely forgotten about the blank check offering until yesterday, so we decided to check in. And the shares were issued a couple of months ago and look to be currently trading on the OTC bulletin board.

For $10.25 you can own a share. That’s a little premium over the issue price, which, diluted was valued at about $9.95 (or $9.93 if the underwriters over-allotment is exercised in full… which it may or may not have been).

It’s not a very liquid market either. The bid-ask spread is $.16. That’s large.

Scanning the filings, Hicks set this up to have minimum disclosure requirements while also skirting the largest requirement in the law that is supposed to give investors some protection. It’s even spelled out in the filing: “You will not be entitled to protections normally afforded to investors in Rule 419 blank check offerings.”

Rule 419 stipulates that for any merger to go through, at least 80% of the shareholders have to approve it.

But not here. Shareholders will have virtually zero say in what business Hicks goes out and purchases with the money.

Hicks made truckloads of money before ever getting involved in sports. But if you want to know what he’s done lately, it’s seems like it’s one big failure pile.

Yet, he can still go to the capital markets and raise $150,000,000 even if he’s not even sure what he’s going to do with it. Reminds us of a throwaway line John Sterwart once sort of slid in as an aside on the The Daily Show one night: “There is no comeuppance in the world anymore.”



About the Author

Precious Roy





3 Comments


  1. dan

    Fascinating, thanks.


  2. I believe the over-allotment was not exercised.


  3. Precious Roy

    I believe you are correct, TFA.



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