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Breakingviews - Boutique SPAC merges Wall Street and Easy Street

A Wall Street sign is pictured in front of the New York Stock Exchange, open during Winter Storm Juno, in the Manhattan borough of New York January 27, 2015. REUTERS/Carlo Allegri

NEW YORK (Reuters Breakingviews) - Wall Street’s advisory shops should know a good deal when they see one. Perella Weinberg, one of the first of the contemporary super-boutiques, looks to be giving its endorsement for the alternative process to going public. What’s less clear is whether the mooted deal, which would combine two unproven corporate finance conventions, will be long-term good for potential investors.

The M&A boutique founded in 2006 by Joseph Perella and Peter Weinberg shelved an initial public offering last year, according to Bloomberg, which also reported the New York company’s plans to be acquired by a special purpose acquisition vehicle, or SPAC. A lot has changed in a year. The S&P 500 Index and Dow Jones Industrial Average hit all-time highs earlier this week. Companies have been seizing the moment to raise equity, and the number of SPACs listed on the public market has reached a fever pitch.

That gives Perella Weinberg an opportunity. In a SPAC deal, the company negotiates directly with the vehicle’s managers as opposed to trying to impress a disparate group of fund managers in an underwriting process. The fee structure incentivizes both parties to get a deal done. Execution is less volatile, and the dynamics are more like an M&A deal, too, which is Perella Weinberg’s bread and butter. With SPAC cash sloshing around, it might even get to shop itself for an ideal valuation. Ex-Citigroup banker Michael Klein’s SPAC could even be a good candidate.

The trouble is that boutiques aren’t consistent home run investments for public shareholders. One of the first to float, Greenhill, has seen its shares fall 40% in the last three years. The stock of PJT Partners has increased almost 70%. Others including Moelis, Evercore, and Lazard are in the middle.

Perella Weinberg shows up on Refinitiv’s most recent 2020 league tables in 24th place advising U.S.-targeted firms. If it goes public, it will have to make financial data available. Still, companies with little revenue have recently listed shares via SPACs, suggesting the structure works well for companies that might struggle with the rigors of an IPO. Investors should have the opportunity to vote on a deal. But Perella Weinberg might just expertly be merging Wall Street with Easy Street.

Breakingviews

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