The bloom may be off the SPAC rose as last week Golden Nugget owner Tilman Fertitta sought to cancel the $6.6 billion deal to take his company public via Fast Acquisition. Golden Nugget holding company, Fertitta Entertainment had agreed first to sell its five Golden Nugget casinos, Landry’s restaurants, NBA Houston Rockets, and 50 percent of its online gaming business to Fast Acquisition but when the deal failed to close by the required date of December 1, Fertitta canceled the agreement.
However, Fast challenged the cancellation saying that Fertitta delayed providing the required documents and therefore delayed the closing process. The company insists that Fertitta is still bound by the obligations of the original deal, and charges Fertitta with a “material breach” of the agreement. The company has threatened legal action against Fertitta if it doesn’t withdrew the cancelation notice.
“Both sides and all counsel fulfilled all obligations to try and close this transaction before the walk away date,” Fertitta said in an emailed statement to the Wall Street Journal, and that SEC approval was only granted on November 24, too late to close the deal on time.
The deal was first announced in February 2021 and was modified along the way to include more Golden Nugget assets to increase the value.
Golden Nugget Online Gaming Inc. (GNOC) went public in June 2020 via deal with a SPAC called Landcadia, valuing the company at $750 million. In August 2021, DraftKings purchased GNOC for $1.5 billion, with Fertitta retaining a 50 percent ownership. Fertitta says the cancelation of the Fast Acquisition deal will not affect the DraftKings agreement.
The Wall Street Journal says SPACs—or blank-check companies—are a risky proposition. Investors form SPACs with money raised from investors to finance a purchase of an existing, private company, avoiding the lengthy IPO process. According to WSJ, more than $150 billion has been raised by SPACs this year, double the total of 2020.
But low stock prices often cause investors to withdraw their money before a purchase can be made. The average SPAC, according to the publication, has lost 60 percent of its value since the end of July, up from 25 percent from earlier in the year.
