Former Media Executives Give New Life to ‘Blank Check’ Corporations An obscure financing technique called “special purpose acquisition corporations,” or SPACs, are increasingly being used as an alternative to private equity.
Over the past several months, new shell companies led by former senior executives of companies like Time Warner, ABC, RCN, DirecTV and VNU have raised hundreds of millions of dollars on the stock market in low-profile deals using an obscure but growing financing technique called “special purpose acquisition corporations,” or SPACs.
SPACs have been gathering steam over the past two years as an alternative to private equity as Wall Street firms like Deutsche Bank, Citigroup, Merrill Lynch and Lazard have begun underwriting them.
The catch in these deals is that investors do not actually know what their money is going to be spent on when they buy shares — hence the “blank check” designation given by the Securities and Exchange Commission.
In return, the founders — who include such media veterans as Herbert A. Granath and Eddy W. Hartenstein — put their own money and reputations on the line. But, they can’t spend the millions raised without first getting the approval of a majority of the shareholders.
Last month, a company called Media & Entertainment Holdings led by Mr. Granath, the longtime ABC executive and former chairman of ESPN, raised $100 million by selling shares and warrants. In February, another SPAC called Churchill Ventures raised $108 million. Its chief executive, Christopher Bogart, is a former general counsel of Time Warner and chief executive of Time Warner Cable Ventures.
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