PowerUp Acquisition Purses Video Gaming & Metaverse Targets (NASDAQ: PWUP)

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A quick start-up

PowerUp Acquisition Corp. (NASDAQ: PWUP) raised $ 287.5 million in an IPO at a price of $ 10.00 per share.

SPAC (Special Purpose Acquisition Company) intends pursue a merger with a company in the field of interactive media, digital media, sports, entertainment and / or recreation, with particular emphasis on video games, adjacent games and new metaverse video game companies.

I advocate an extremely “punchy” approach to SPAC investing and look for strong management teams and at least one successful SPAC transaction under their belt.

So I’m waiting for SPAC Acquisition PowerUp in the short term.

PowerUp has 2 executives leading its sponsor, PowerUp Sponsor LLC.

The sponsor is led by:

– Executive Chairman, Bruce Hack, who was previously Chairman of the Board of Technicolor SA and key player in the creation of Activision Blizzard, then Deputy Chairman.

– Chairman and CEO, Jack Tretton, who was President and CEO of Sony Computer Entertainment.

SPAC is the first vehicle in this management team.

The PowerUp market

According to a 2020 market research report from Grand View Research, the global video game market was estimated at $ 151 billion in 2019 and is expected to reach $ 398 billion in 2027.

This represents an expected CAGR of 12.9% from 2020 to 2027.

The main drivers behind this expected growth are the increasing proliferation of services provided via the Internet, growing consumer demand for more interactive entertainment and major technological innovations in the industry.

Below is also a graph of the historical and expected future market path for the US video game market through 2027:

US video game market

The US Video Game Market (Grand View Research)

PowerUps SPAC IPO Terms

New York, NY-based PowerUp sold 28.75 million units of Class A shares and warrants at a price of $ 10.00 per share.

SPAC has 15 months to complete a merger (initial business combination). If he fails to do so, shareholders can redeem their shares for the remaining listing proceeds held in the trust.

Stock symbols include:

  • Devices (PWUPU)

  • Warrants (PWUPW)

  • Common stock (PWUP)

Founder shares represent 20% of the total shares and consist of B shares.

Sponsor SPAC also purchased 9.76 million warrants at $ 1.50 per share. warrant in a private issue. Each Warrant entitles the Limited Partner to purchase a Class A share at $ 11.50 per share. shares.

The conditions for the SPAC to carry out an initial business combination include the requirement to acquire one or more companies corresponding to 80% of the SPAC’s net assets and a majority of the votes in favor of the proposed business combination.

SPAC may issue additional shares to complete a proposed merger. If so, the Class B shares will then be increased to retain the sponsor’s 20% shareholding.

SPAC is interesting because it seeks to merge with a target company in the broader video game industry.

The company’s management has strong operational expertise in the industry and a long experience in video games and media.

However, the team has no previous SPAC experience, so has no track record for SPAC success.

Investing in a SPAC prior to the publication of a proposed business combination is essentially investing in SPAC’s top management, their ability to create value and their past performance for SPAC shareholders.

Investing in a SPAC can thus be compared to investing in a venture capital company as a limited partner.

The cost of this investment is about the same, 20% of the benefit to the SPAC sponsor, but the time frame to realize a significant gain can be much faster, a period of 1-3 years for a SPAC versus 10 or more. years for a typical venture capital fund.

The video game market is expected to grow at a significant growth rate over the next few years, although the marketing side of the business will undergo significant adjustments due to changed advertising policies for large horizontal platforms like Apple (AAPL) and Google (GOOG) (GOOGL).

These changes, which include phasing out the use of individual advertising IDs, served to negatively impact the ability of game developers to target potential users, potentially increasing the cost of acquiring players.

Although management’s track record is impressive, and an investment in SPAC may be justified solely from this aspect, their lack of previous SPAC experience is a significant disadvantage of this option.

With so many SPACs chasing a limited number of high quality targets, SPACs have underperformed the overall IPO market in recent years.

I am in favor of an extremely “selective” approach and am looking for strong management teams and at least one successful SPAC transaction.

So I’m waiting for SPAC Acquisition PowerUp in the short term.

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