Why don’t clean energy entrepreneurs in the U.S. make more of an effort to sell distributed generation and batteries as a way to provide more reliable electricity and backup power? They would seem to have a big advantage in doing so. After all, unlike more traditionally-fueled backup power generators, solar power doesn’t require any fuel to be transported onsite, and batteries can extend the solar power supplies even to the hours when the sun isn’t shining. Since my firm invests project capital for distributed, sustainable infrastructure, we’ve been eagerly looking for entrepreneurs selling such systems to improve their customers’ resiliency and reliability. But we’ve only found a very few, at least among those selling to commercial and industrial (”C&I”) customers.
After Superstorm Sandy hit and knocked out power across the eastern seaboard, and with the more recent power supply interruptions in places like California, many business owners are now keenly aware that reliable electricity is crucial to their businesses. One estimate says that power outages cost U.S. businesses $27 billion per year. This is one reason why the annual market for backup power generators is around $40 billion per year. This is not a small market opportunity.
However, despite a lot of chatter these days in the industry about “resiliency”, in my recent experience most U.S. clean energy entrepreneurs and developers don’t actually sell their systems to such business customers with a reliability-based value proposition. “It’s hard to find customers willing to pay for it,” most tell me.
It’s not like this in other markets around the world, however. I’ve been pitched multiple times over the years by C&I clean energy developers who are working in parts of the world where power supplies are notoriously unreliable, and there they make the sale explicitly about backup power. Customers are definitely willing to pay for it in those places.
Nonetheless, in the U.S. most “behind-the-meter” (i.e., on the end-user’s premises) solar and battery systems are actually designed to constantly interact with the grid, not act in isolation from it. Providing capacity back to the grid when it’s profitable to do so, or using onsite storage to smooth out the customer’s electricity consumption to lower their utility bills, for example. But without being “islandable”. Indeed, when Superstorm Sandy came through, many business owners with solar on their rooftops discovered that the systems couldn’t provide them with any power when the grid went down. You would think that nearly a decade later, C&I solar and “microgrid” (mostly: solar + batteries) developers would have decided to more directly address this, but in speaking with many such entrepreneurs even just this past year I’ve found very few yet that are offering true resiliency benefits.
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There are, of course, some good reasons for this seeming gap in the marketplace.
- Grid electricity remains relatively cheap in most parts of the U.S., and grid reliability is still high, so while business owners are generally more aware of the risks of power outages, for most it’s not the first thing they think about when they wake up each morning. For those businesses where electricity uptime is more obviously mission-critical, many already have in place diesel or natural gas backup power generators.
- While many states have put in place incentives and/or utility mandates for the deployment of batteries, the focus has been on the use of batteries to add resiliency and peak capacity to the grid itself. These incentives then pass through to the developers, who see more lucrative revenue opportunities in servicing grid reliability than in setting up microgrids to provide onsite reliability. And if they’re using the batteries to service the grid at times of need, this means they can’t also keep the batteries fully charged up for onsite reliability. It’s a trade-off. Sometimes the state-level regulatory complexity is so severe that it leads developers to put both solar and batteries at the same building, but with separate meters, effectively isolating them from each other.
- Battery prices are dropping quickly, but remain high enough that the costs are generally too high for any system designed to provide very long-duration (24+ hour) backup power using onsite storage alone.
But all that acknowledged, it’s high time that American clean energy entrepreneurs figured this out.
Battery prices are indeed falling very quickly (lithium ion battery costs have fallen 89% in 10 years), and solar system prices continue to fall too. It will not take long for some of the math to get a lot easier for the use of solar plus batteries as a reliable backup power source.
This is especially true if microgrid developers learn to lower the bar for what level of backup power they need to promise to win sales. The entrepreneurs I speak with seem to feel like they would need to offer backup power that could last days. But the average length of a power interruption in the U.S. ranges from about 2-3 hours. In the 2020 California rolling blackouts, people who lost power generally lost it for about an hour or two at a time. Wouldn’t a six-hour resiliency promise satisfy a lot of the market, except in extreme events? This more achievable value proposition simply hasn’t been tested very well yet.
Furthermore, these microgrid developers almost never seem to utilize software as a key way to stretch out limited battery capacity. But sophisticated load control software is available that, in the case of an outage, could “dial down” the facility’s consumption of electricity for non-crucial tasks. Bundling smart software with the microgrids could greatly reduce the size of the batteries needed to achieve that longer-duration backup power.
Adding in a “resiliency fee” as part of a microgrid-based power purchase agreement would also make them more financeable. Project finance loves predictable revenue streams, and yet most battery developers are going after variable revenue from “ancillary services”, and other payments from the utility for providing extra capacity to the grid. If they were to provide that reliability instead to the C&I customer in exchange for a nice, predictable monthly fee, that would in many cases be more attractive to the project financiers they need to fund these installations. And ultimately, microgrid developers should be able to get more revenue by eliminating the utility middleman and providing reliable power directly to an end customer.
Finally, market attitudes and government policies are clearly both heading in the direction of valuing resiliency. In the discussion draft of an upcoming bipartisan energy law, the US Congress appears to be including a mandate to the Department of Energy to establish a program to promote the development of “micro-grids to increase the resilience of critical infrastructure.” In Wisconsin, at the urging of customers, Northern States Power is proposing to launch a 22 project microgrid resiliency pilot. And indeed, I am now starting to speak with more microgrid developers who are trying to figure it out, because their customers are asking for it more and more in light of 2020’s highly visible outage events.
Yes, there are significant obstacles standing in the way of American clean energy entrepreneurs going more directly after business models based upon resiliency rather than grid services. But it’s time we figured this out. The market opportunity and the market pain points are both very real.
A new product category called analytic process automation (APA) is changing corporate culture to empower more people with data-driven insights, not just highly trained data scientists. The expansion of self-service insights and the ability for people to learn analytics skills at their own pace are having a profound impact on corporate cultures and workforce skillsets.
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“Data analytics has become a requirement for leaders across industries, given the need to understand the state of the business today and where to head next,” said Libby Duane Adams, cofounder and chief customer officer at Alteryx. “APA is helping to expand a new insights-driven culture in which executives can no longer rely on old methods of gut instincts alone.”
Training Unemployed Professionals
Alteryx is working to build the analytics skills of unemployed business professionals through a new program called ADAPT (Advancing Data & Analytics Potential Together). The public upskilling initiative—available globally to unemployed workers—provides free instruction and professional certification on analytics skills and connects people with peers in the business community.
Participants learn skills such as analytical problem-solving, creating datasets, and segmentation. The ADAPT program also teaches A/B testing, a tool used by marketers to send two versions of an email, webpage or app to customers and gauge the responses.
“The ADAPT program is our purpose in action, and it’s happening at a time when the need for skilled analysts, data workers and problem-solvers has never been more urgent,” said Amy Heidersbach, chief marketing and community officer at Alteryx. “Companies can’t find or hire enough people with these skills.”
Building An Analytics Movement
The shortage of highly trained data scientists is leading companies to find new ways of increasing data literacy and empowering more employees to embark on their own analytic journeys. APA platforms help “citizen data scientists” build analytic models without having to be trained statisticians. This means organizations don’t need to seek out only highly trained data scientists to get the job done.
For example, a top 10 automotive company was able to expand its army of analysts from 400 to more than 4,000 in 18 months by reskilling data workers with APA. Now sophisticated problem-solving happens across more people and departments, from manufacturing and logistics to HR and finance.
Reskilling existing employees can be crucial to an organization’s digital transformation. In PwC’s annual CEO survey, 79% of CEOs said they did not feel ready to take on the business strategies in front of them with the skills and talent level of their current workforce. PwC’s own upskilling transformation has given the consulting giant new insights it can now bring to its clients.
“Thousands of PwC professionals leverage the power of Alteryx-based automation solutions to help our clients solve important business problems,” said Suneet Dua, chief product officer at PwC US. “The Alteryx Platform was an integral part of our firm’s digital transformation. Upskilling people in order to help drive business-changing outcomes is one of the core reasons we formed a strategic relationship with Alteryx.”
APA enables leaders to upskill employees with technology that “essentially creates a workflow for analytics and problem-solving,” said Duane Adams. “By upskilling people to handle the entire analytic process—rather than being an expert in one or two technologies and then handing it to someone else who is an expert in a different piece of technology—it’s allowing those individuals to own the process from beginning to end.”
Empowering New Data Workers
From a skillset perspective, APA is allowing IT organizations to focus on their core competencies, as opposed to what they’ve been assigned to focus on. Historically, IT organizations were given responsibility for owning the data warehouse, but weren’t trained in developing or maintaining data warehouses. Often, line-of-business analysts would have to wait for IT to build processes and fetch data for them. APA gives analysts and citizen data scientists access to the data they need to get the answers they want without having to rely on IT resources.
In one instance, a CIO of a large financial services institution based in Southern California is leading a data-on-demand initiative. The company’s vision is to put the power of data-driven insights back into the line of business. APA brings both the data and the problem-solving firepower directly to business managers.
This is also how APA drives lasting cultural change, by making the upskilling process perpetual.
“Once someone is skilled in predictive analytics, the natural next question is, ‘What can we do now?’” said Duane Adams. “This continuum of improving and advancing skills, as well as the thought process to continue learning, should ultimately be a nonstop cycle.”
From left to right: Cathie Wood of Ark Investments, Nancy Zevenbergen of Zevenbergen Capital Investments, and Karina Funk of Brown Advisory. These investors and many other female-led funds have thrived in 2020.
TIM PANNELL, JAMEL TOPPIN & ELI WARREN FOR FORBES. DESIGN BY FORBES
In an investment industry known for big egos, overconfident analysts and “activists” who routinely tell CEOs how to run their companies, investor Nancy Zevenbergen and her team of four portfolio managers differentiate themselves by simply listening.
Zevenbergen, 61, founder of $5.7 billion (assets) Zevenbergen Capital Investments, believes the crucial job of an investor in today’s economy is to uncover the next great entrepreneur or technological innovation early on. The style is about “optimism and a view toward what the future might be,” she says. According to Zevenbergen, her task is to be curious and “understand the ‘crazy’ visions of new leaders and become investors alongside them.” If she likes a company, her Seattle-based firm will load up and watch from the sidelines, tracking the business patiently and holding their shares so long as growth doesn’t stall. Rarely do they worry too much about valuation.
This humble approach to investing has yielded results that make Zevenbergen among the best investors in the world. She has stuck by mercurial Elon Musk and owned Tesla for about a decade; Tesla’s stock is up 730% this year, and is the top performing stock of the ten years. She discovered Ottawa, Canada-based ecommerce company Shopify and its founder CEO Tobi Lütke in late 2016 when it was trading below $50; it now trades for $1,170. Last September, Zillow chief executive Rich Barton decided the real estate platform would begin buying homes, leading to complaints from skeptics who sent its shares cratering 20% to below $30. Zevenbergen’s team liked Barton’s experimentation and built a large position. Fifteen months later, Zillow now trades for $140.
Seattle-based Nancy Zevenbergen calls investing with a less than five-year time frame “truly speculative.” Case in point: She’s owned Amazon since it traded in the $60s and still holds shares after a 90-fold rise.
TIM PANNELL FOR FORBES
With stock-picks like these, Zevenbergen’s Innovative Growth Fund (SCATX) and Genea Fund (ZVGNX) are up a staggering 126% and 154%, respectively, in 2020. Of over 1,000 peer funds tracked by Morningstar, the two mutual funds rank in the top percentile.
Zevenbergen created her firm from her living room in the late 1980s with just $500,000 in assets while she nursed a young child. Her flagship strategy has beaten the S&P 500 Index by around four percentage points annually since 1987, but 2020 was a watershed. Assets more than doubled soaring towards $6 billion, based on performance and inflows to her mutual funds.
Zevenbergen is not the only woman fund manager who has crushed competition in 2020. Forbes found at least a half a dozen firms led by women-led funds that have blown away their peers and drawn in tens of billions of dollars in assets collectively since the start of January.
For more on top female-run funds, see our table below of outperforming managers. (Source: Morningstar)
Cathie Wood, founder of Ark Investments, had the best year of anyone. In 2014, Wood, 65, created Ark with the idea of packaging stock-picking into tax-efficient exchange traded funds, and focusing exclusively on breakthrough innovations in genomics, robotics, financial technology, autonomous driving, digital services, and artificial intelligence.
Six years later, Ark manages nearly $44 billion in assets, up from just $300 million at the end of 2016. This year, Ark funds have pulled in over $10 billion in new assets, led by extraordinary returns. Her flagship Ark Innovation Fund (ARKK) has seen assets soar to $17 billion, fueled by a 154% gain in 2020 and a 46% average annual return over the past five years. Her $6 billion Ark Genomic revolution ETF is up even more this year. “I wanted individual investors to catch the wave,” says Wood of today’s enormous technological change.
Ark publishes its financial models, trading logs, and research to the investing public, and the firm’s analysts are happy to engage in discussion on Twitter, opening themselves to criticism and mockery. Wood’s $4,000 a share valuation of Tesla a year ago drew many scoffs on Wall Street. But her heady valuation was spot on. Short sellers have been burned by Tesla’s rise, while female investors like Zevenbergen and Wood have been patient bulls. On Friday, Tesla was added to the S&P 500 Index.
Female investing success in 2020 extends well beyond soaring growth stocks. Women-run funds are leading the way in everything from small cap stocks, to emerging market debt portfolios, dividend paying companies, and sustainable investments.
Amy Zhang, portfolio manager of the Alger Small Cap Focus Fund (AOFIX) and Mid Cap Focus Fund (AFOIX) was hired in 2015 to expand Alger’s presence in niche small and mid-cap stocks. When Zhang arrived at Alger, the Small Cap Focus Fund had just $16 million in assets. Now, after a 54% return in 2020 and a 30% annual average return over the past five years, Zhang’s Small Cap Focus Fund has $7.5 billion in assets. Top holdings include refrigerated logistics upstart CryoPort and fast casual restaurant Wingstop. Her Mid Cap Focus Fund, launched in mid-2018, has attracted over $500 million in assets as it has soared by 84% in 2020, bolstered by casino operator Penn National Gaming and power equipment manufacturer Generac.
Long before sustainable investments became a prolific buzzword, Karina Funk, an MIT-educated engineer at Baltimore-based mutual fund giant Brown Advisory, was a pioneer in bringing sustainable investments mainstream. Funk, 48, a vegetarian who watches her carbon footprint by biking to work, launched the Brown Advisory Sustainable Growth Fund in June 2012, alongside David Powell, with a goal to back about 35 companies with products improving social and environmental sustainability, or efficient operating footprints.
Its focus on companies like Ball Corp. and American Tower has made it one of the best funds on the planet during down markets. Even in 2020, the fund has gained 38% despite its defensive posture, thanks to savvy picks like life sciences conglomerate Danaher and Etsy, which has empowered many small businesses during the pandemic. Funk can be a tough customer. She exited Facebook in the fall of 2018 due to data privacy concerns.
“Sustainability is a means, not an end in and of itself,” she told Forbes as part of a profile three years ago, when the fund’s assets were just $1.1 billion. “Our end goal is performance. We achieve that by finding fundamentally strong companies using sustainability strategies to get even better.” The fund’s assets have since soared to $4.6 billion.
Other female-led funds that have done well include Capital Group’s $128 billion American Funds New Perspective (ANWPX), led by a team of managers including Joanna Jonsson and Noriko Chen, and the $36 billion in assets JPMorgan Equity Income Fund (HLIEX), led by Clare Hart. The New Perspectives fund has beaten its benchmark by four percentage points annually over the past decade, while Hart’s Equity Income Fund has returned an annualized 11.65%, two percentage points annually above its benchmark, according to data from Morningstar.
Rebecca Irwin, Natasha Kuhikin and Kathleen McCarragher of the $1.3 billion in assets PGIM Jennison Focused Growth Fund (SPFAX) have returned 68% in 2020 and 25% over the past five years, ranking in the top decile of peer funds. At Alger, Ankur Crawford, co-manager of the Alger Spectra Fund (ASPIX) and Alger Capital Appreciation (ACCAX) has seen returns surpass 40% this year.
In fixed income, Tina Vandersteel of the $4.4 billion in assets GMO Emerging Country Debt Fund (GMCDX) has been able to outperform emerging market bond indices despite underweighting China and many Gulf-states due to her skepticism of the veracity of their economic data.
The bull market of 2020 is also creating new opportunities for female fund managers to shine. Two years ago, Julie Biel of Los Angeles-based Kayne Anderson Rudnick, was a rising star at the $30 billion (assets) firm and excited about the looming public offering of software company DocuSign. Known for investing in established businesses, Kayne had never participated in an IPO. Biel was late in her pregnancy as the IPO progressed and trying to win an allocation. She needed a doctor’s note to fly to the Bay Area to meet with DocuSign’s management. Kayne eventually won a large block of shares, quickly becoming one of its largest outside investors.
Biel also began to manage the firm’s KAR Small Mid- Sustainable Growth strategy around that time and made DocuSign the fund’s top holding. Its shares have risen 225% in 2020. This year, Biel’s fund has returned 42% through November. In December, Kayne decided to launch a mutual fund version, launching the strategy, called the Virtus KAR Small-Mid Cap Growth Fund (VIKSK), with Biel in charge.
Like Zevebergen and Wood, Biel is starting small and manages just $60 million. But the investment industry rewards performance above all, hinting at much larger things to come. Entering 2021, Biel’s portfolio is loaded with hidden gems like Ollie’s Bargain Outlet and MarketAxess that could grow for years to come.
MANCHESTER, ENGLAND – DECEMBER 18: Prime Minister Boris Johnson meets apprentice Talha Batan (R) and … [+]
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In a speech at West Point, the NATO affairs adviser to the U.S. President declared that Britain had “lost an empire and had not found a role,” and also said that “Britain’s attempt to play a separate power role – that is, a role apart from Europe, a role based on a ‘special relationship’ with the United States, is about played out.” The President in question was Jack Kennedy, the adviser was former Secretary of State Dean Acheson and the year 1962. While it is reassuring to see that some ‘traditions’ do not change, it is surely time for Britain to move on.
That time may now be upon us.
Brexit has proven the most vexacious political project of recent time. It is, to quote Churchill (his view on Russian foreign policy) a riddle, wrapped in a mystery, inside an enigma. We have never known what Brexit really was or where it was going, and the most confused of all were its promotors. The tortuous path to a deal of sorts is now close to an end, for better or worse.
Deal soon?
I don’t want to go into the detail of any deal that may soon materialize or whether it will hold (it will become law!) but I do want to stress that Brexit is highly significant to our age because it is both the faultline and crucible of so many issues of our time. With the year ahead upon us, it is time to take stock of these.
Brexit was the first significant fracture in the globalized world order. Britain led globalization in the 19th century and London was arguably its epicenter in the 20th and early 21st centuries. That this phase of Brexit is now closing suggests that the process towards a new world order is underway (as per my TED Talk) but equally the fact that Brexit has taken so long suggests that the process towards ‘something else’ will take a long time.
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There are many other fractures in the globalized world order to come and to speculate, I can think of Turkey’s exit from NATO, China’s scramble for Africa, the Emirates and India becoming a new ‘power’, the growing impact on geopolitics of climate damage, and the even deeper irrelevance of bodies like the WTO (World Trade Organization).
Scottish Independence
Brexit has also fractured history closer to home. On hearing that the vote in the north east of England had turned for Brexit in the early hours of that fateful vote, my first thought was that the long history of the United Kingdom and Ireland had been smashed.
Scotland will most likely become independent, and the lesson of Brexit is that this process should happen in such a way that bolsters Scotland’s economy, and preserves close and open ties to England, Wales and in particular Northern Ireland. In turn, there is now much talk about a united Ireland, though if referenda on this question are to take place, then at very least this needs to be preceded by much greater interlinking infrastructure between Ireland and the North, and most importantly a Marshall style plan for Northern Ireland’s economy and society.
United Ireland
One of the errors in the immediate aftermath of Brexit was the failure of European leaders to grasp the import of Britain’s vote and the possibility that the factors that motivated Brexit might ripple across Europe. The past five years saw the rise of radical politics across Europe, though this has largely been contained by the centre.
With cyber wars being waged above, below or around us, Europe is still behind the US and China in terms of what Emmanuel Macron calls ‘strategic autonomy’ (effectively the need to be self sufficient in AI, cyber capabilities, 5G and so on), but the Brexit process has shown and burnished its strengths in two respects. One is the formidable heft and expertise of European technocracy as exemplified by Michel Barnier (who surely deserves a knighthood) and more importantly by the rise of the concept of solidarity, where the EU has at nearly all times spoken with one voice on Brexit. Like the crisis management lessons learned during the euro-zone crisis, the lesson of solidarity is something that needs to be diffused across EU foreign policy.
Solidarity
On a somewhat related note, Brexit could have been cast as a struggle between populists and technocrats, both in the sense of the struggle between Whitehall and Westminster, and London and Brussels. It recalls Yeats’ line in ‘The Second Coming’ that ‘the best lack all conviction while the worst are full of passionate intensity’. This has been a major theme of our times – laws, science and democracy under attack from morally free wheeling populists. The failure of Donald Trump to be re-elected and the many failures of Brexit, suggest that the ‘brave’ are regaining their conviction, and that the ‘worst’ need more than intensity.
In this context, my final thought is what happens to the Brexit Dream? There is some comfort to be had in the fact that Britain is good at reinventing itself, especially it seems after wars with the French! It is likely however, that the task of filling out the template of Global Britain will fall to a new generation of politicians, and potentially activists from outside politics. It is telling that one of the most socially impactful public figures in the UK this year is the footballer Marcus Rashford whose literacy and school meals program have repaired the shortfalls in government spending. Professional politicians should take notice.
Theresa May often stated ‘Brexit means Brexit’. At first, it appears a meaningless comment, but the longer Brexit has gone on and become its own (il)logical universe, the wiser ‘Brexit means Brexit’ sounds. It is however, time to move on.
Here’s Why Some SPAC Deals Might Fail To Get Shareholder Approval
The deluge of special purpose acquisition companies (SPACs) that flooded the public markets in 2020 reminds me of Forrest Gump’s line about a box of chocolates. At a time when nearly everyone seems to be launching a SPAC – from established private equity firms and hedge funds, to start-up entrepreneurs, to celebrities and political figures with no prior capital markets experience – investors really don’t know “what they’re gonna get.”
Year-to-date, there have been more than 237 SPAC public offerings, raising an aggregate of nearly $80 billion, according to SPAC Insider. There have been more SPAC IPOs this year than in the previous 5 years combined – and the capital raised by these vehicles in 2020 is greater than the IPO proceeds of all SPACs from 2009-2019.
As they proliferate, SPACs are becoming larger and more complex. Recently, Dyal Capital (an arm of Neuberger Berman) and Owl Rock Capital (a mid-market finance provider) announced plans to merge with a SPAC, which would create an entity valued at $13 billion.
The IPO of Pershing Square Tontine Holdings, Ltd. (Nasdaq: PSTH), sponsored by “legendary” hedge fund manager Bill Ackman, was the largest-ever offering of a blank check company on the NYSE and currently has a market value of about $5 billion. SPACs are being used as vehicles to bring public companies that will drive your car (Luminar) or fly you to the Hamptons (Blade) – truly Tomorrowland right here and now.
Challenge: Securing Deal Approval from Shareholders
While raising capital for a SPAC may seem like smooth sailing in today’s market environment, sponsors may face rough seas when they try to get their new shareholders to approve the deals they strike. Each SPAC generally has a 24-month window to complete a deal to buy a company, which must be approved by a vote of the SPAC shareholders, or else the entity must liquidate and return its capital to investors. The turnover in the shareholder base that occurs once a deal is announced, coupled with the arduous task of getting retail shareholders to vote and the details of the voting process, means that not all of these deals will get approved.
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At this writing, 202 of the SPACs that completed IPOs in 2020, and 19 of the 2019 vintage, are still looking for deals. Given the vast amount of SPAC capital chasing a finite number of acquisition targets, and the relatively short window in which to make an acquisition, we are likely to see a number of SPAC sponsors trying to do deals at inflated valuations. However, SPAC shareholders believe they bear no risk in voting down an acquisition that they view to be over-valued – they’ll either have a chance to vote on a better deal later on, or they’ll get their money back with interest.
A Solid Proxy Solicitation Plan is Critical
To avoid losing an acquisition approval vote, SPAC sponsors need to pay careful attention to planning and executing the solicitation of shareholder support. This proxy solicitation process may be unfamiliar territory for sponsors that have little or no experience in engaging with investors, including the many retail shareholders who have been drawn to the recent SPAC offerings. Among the challenges in getting to a “Yes” vote:
Getting proxy materials into shareholders’ hands. As I’ve noted in a prior Forbes column, it can be tough for companies to identify and contact their investors. Under current securities rules and procedures, the identities of most retail shareholders are hidden as “beneficial owners” behind broker intermediaries. Thus, many investors holding shares in “street name” are considered to be Objecting Beneficial Owners (OBOs) and companies can only communicate with them through these intermediaries. Any shareholder who does wish to allow a company or its agents to contact them directly must consent to being a Non-Objecting Beneficial Owner (NOBO). Contacting these holders is likely to be complicated further by the relatively high turnover of SPAC shares; the shareholder roster is not static.
· Obtaining favorable voting recommendations. Proxy advisory services, including ISS and Glass Lewis, routinely provide proxy analysis and voting recommendations on issues that are subject to a vote by their investment firm clients – including approvals of SPAC acquisitions. What some SPAC sponsors may not realize is that many institutional holders have a policy of following the advice of ISS or Glass Lewis, who have been known to recommend against approval of a SPAC acquisition. A well-planned proxy solicitation effort – including outreach to the proxy advisors and investors – will take this issue into account.
· Maintaining shareholder support after the vote. A peculiar characteristic of SPACs is that it is possible for shareholders to vote in favor of a deal, but still request that their money be returned. A sponsor could therefore be in the theoretical position of winning the acquisition vote, but having insufficient capital to complete the deal. This deal feature is all the more reason for SPAC sponsors to actively engage with their investors once a target has been identified, to ensure that investors not only vote “Yes,” but also recognize the value of the asset being acquired and the prospects for the business post-acquisition.
As newly-minted SPAC sponsors consider the challenges of winning the shareholder vote, it’s worth looking back at a great American novel about elections and their consequences: Robert Penn Warren’s All the King’s Men. An advisor tells Willie Stark, who is running for Governor of Depression-era Louisiana, “Forget the rest of the tax stuff… Willie, make ’em cry, make ’em laugh, make ’em mad, even mad at you. Stir them up and they’ll love it and come back for more…”
Winning a proxy vote is (usually) a lot different than a political contest, of course, but you still have to motivate shareholders to come around to your point of view on the value of your SPAC deal.