Over the last seventeen months, thirteen blank check companies have completed IPOs raising gross proceeds in excess of $500 million. All of these deals have been artfully priced, most often as a unit deal at $6 per unit, with each unit consisting of one share of common stock and warrants to purchase two additional shares of common stock at $5 per share. Most of the proceeds are placed in escrow. If the companies are unable to complete an acquisition within an eighteen-month period, the escrowed proceeds are returned to the non-insider shareholders.
One of the blank check companies, Millstream Acquisition Corporation, has already completed an acquisition. On August 31, 2004, the company closed on the acquisition of NationsHealth, Inc. The acquisition was initially announced on March 9, 2004. The common shares, trading at $5.00 prior to the announcement of the transaction, bounced as high as $8.20 before settling back to $6.90 as of December 31. The warrants and units, trading at $.78 and $6.50 respectively, traded as high as $3.19 and $14.80, before settling back to $2.08 and $10.10 at the end of the year.
On December 20, 2004, a second blank check company, Chardan China Acquisition Corporation, announced that it had entered into an acquisition agreement that is expected to close during the second quarter of 2005. On December 17, the common stock of Chardan closed at $5.05 per share. By December 31, it had moved up to $6.63. The warrants, which closed at $.90 per warrant on December 17, closed at $1.90 on December 31. The units, which closed at $6.90 per unit on December 17, closed at $10.30 on December 31.
Based on the performance of Millstream and Chardan, it is probably reasonable to assume that the securities of each of the blank check companies will pop when they announce an acquisition. The conservative play would be to buy the common shares, which are generally trading at their liquidation value. Worst case scenario: You get your money back. The more speculative route would be to buy the warrants.
Please note that these warrants are highly speculative and that their long-term value is dependent on the ability of the company’s management to source and close on a transaction that will create value. If you make any purchases, I would suggest that you buy a basket of the warrants. It is also important that you do your own due diligence.
More detailed information on the offerings can be found on the following thread:
Subject 55438
CEA Acquisition, Inc.
Common stock price (CEAC): $5.33
Warrant price: (CEACW): $1.00
IPO Date: February 14, 2004
Expiration date: February 11, 2008
Exercise price: $5.00
Number of common shares outstanding: 4,090,000
Number of warrants outstanding: 8,050,000
Cash per share held in escrow: $5.10
Great Wall Acquisition Corporation
Common stock price (GWAQ): $5.25
Warrant price: (GWAQW): $.93
IPO Date: March 19, 2004
Expiration date: March 16, 2009
Exercise price: $5.00
Number of common shares outstanding: 5,515,975
Number of warrants outstanding: 9,031,950
Cash per share held in escrow: $5.13
Tremisis Energy Acquisition Corporation
Common stock price (TEGY): $5.10
Warrant price: (TEGYW): $.78
IPO Date: May 13, 2004
Expiration date: May 11, 2008
Exercise price: $5.00
Number of common shares outstanding: 7,700,000
Number of warrants outstanding: 12,650,000
Cash per share held in escrow: $5.18
Arpeggio Acquisition Corporation
Common stock price (APGO): $5.14
Warrant price: (APGOW): $.90
IPO Date: June 24, 2004
Expiration date: June 23, 2008
Exercise price: $5.00
Number of common shares outstanding: 8,300,000
Number of warrants outstanding: 13,600,000
Cash per share held in escrow: $5.14
Sand Hill IT Security Acquisition Corp.
Common stock price (SHQC): $5.10
Warrant price: (SHQCW): $.89
IPO Date: July 27, 2004
Expiration date: July 25, 2009
Exercise price: $5.00
Number of common shares outstanding: 5,110,000
Number of warrants outstanding: 8,220,000
Cash per share held in escrow: $5.10
China Mineral Acquisition Corporation
Common stock price (CMAQ): $5.00
Warrant price: (CMAQW): $.75
IPO Date: August 30, 2004
Expiration date: August 24, 2009
Exercise price: $5.00
Number of common shares outstanding: 5,000,000
Number of warrants outstanding: 8,000,000
Cash per share held in escrow: $5.10
Rand Acquisition Corporation
Common stock price (RAQC): $5.15
Warrant price: (RAQCW): $.95
IPO Date: November 2, 2004
Expiration date: October 26, 2008
Exercise price: $5.00
Number of common shares outstanding: 5,600,000
Number of warrants outstanding: 9,200,000
Cash per share held in escrow: $5.16
China Unistone Acquisition Corporation
Common stock price (CUAQ): $5.15
Warrant price: (CUAQW): $.90
IPO Date: November 24, 2004
Expiration date: November 17, 2008
Exercise price: $5.00
Number of common shares outstanding: 4,200,000
Number of warrants outstanding: 6,900,000
Cash per share held in escrow: $5.10
International Shipping Enterprises, Inc.
Common stock price (ISHP): $5.40
Warrant price: (ISHPW): $.97
IPO Date: December 14, 2004
Expiration date: December 9, 2008
Exercise price: $5.00
Number of common shares outstanding: 39,900,000
Number of warrants outstanding: 65,500,000
Cash per share held in escrow: $5.49
Millstream II Acquisition Corporation
Common stock price (MSMA): $5.15
Warrant price: (MSMAW): $.80
IPO Date: December 23, 2004
Expiration date: December 16, 2008
Exercise price: $5.00
Number of common shares outstanding: 5,600,000
Number of warrants outstanding: 9,200,000
Cash per share held in escrow: $5.10 |
