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A Quick Take On Monterey Capital
Monterey Capital Acquisition Corp. (MCAC) has raised $92 million from an IPO at a price of $10.00 per unit, according to the terms of its most recent S-1 regulatory filing.
The SPAC (Special Purpose Acquisition Company) intends to pursue a merger with a company in the clean transition sector.
Since Monterey’s leadership doesn’t have a successful SPAC track record, I’m on Hold for MCAC at the present time.
Monterey Capital Background
Monterey Capital has 2 executives leading its operations:
– Chairman and CEO Bala Padmakumar, who has experience in the clean transition advisory space and has been an investor in the cleantech and materials sectors.
– EVP and Director Vivek Soni, who has held board positions and senior management roles at various companies in the cleantech and venture capital space.
The SPAC is the first vehicle by this executive group.
Monterey Capital’s Market
According to a 2021 market research report by Facts & Factors Research, the global market for clean energy technologies was an estimated $284 billion in 2020 and is forecast to reach nearly $424 billion by the end of 2026.
This represents a forecast CAGR of 6.9% from 2021 to 2026.
The main drivers for this expected growth are growing industrialization and urbanization leading to a demand for more efficient uses of energy sources without environmental pollution.
Also, below is a summary chart of the trajectory of the global cleantech market through 2026:
Clean Energy Technologies Market (Facts & Factors)
Monterey Capital’s SPAC IPO Terms
Monterey, California-based Monterey Capital sold 9.2 million units of Class A common stock, warrants and rights at a price of $10.00 per unit for gross proceeds of approximately $92 million, not including the sale of customary underwriter options.
The IPO also provided for one warrant exercisable at $11.50 per share and 1/10th of a right to on consummation of its initial business combination from the closing of an initial business combination, and expiring 5 years after completion of the initial business combination or earlier upon redemption or liquidation.
The SPAC has 18 months to complete a merger (initial business combination). If it fails to do so, shareholders will be able to redeem their shares/units for the remaining proceeds from the IPO held in trust.
Stock trading symbols include:
Founder shares are 20% of the total shares and consist of Class B shares.
The SPAC sponsor also purchased 3.04 million warrants at $1.00 per warrant in a private placement.
Each placement warrant will entitle the sponsor to purchase one share of Class A common stock at $11.50 per share and are identical to the public warrants except they will have restriction on transfer and will be entitled to registration rights.
Conditions to the SPAC completing an initial business combination include a requirement to purchase one or more businesses equal to 80% of the net assets of the SPAC and a majority of voting interests voting for the proposed combination.
The SPAC may issue additional stock/units to effect a contemplated merger. If it does, then the Class B shares would be increased to retain the sponsor’s 20% equity ownership position.
Commentary About Monterey Capital
The SPAC is notable due to its focus on the cleantech transition sector, which encompasses a wide variety of technologies and industries.
The leadership of the SPAC has some experience in investing and advising in the cleantech sector, however the team does not have a previous successful SPAC track record, which is a definite negative.
The cleantech transition space is large and likely to grow substantially as an environmentally-conscious ethos has taken root among firms seeking to improve the sustainability of the operations and reduce climate risk in their future.
Investing in a SPAC before a proposed business combination is announced is essentially investing in the senior executives of the SPAC, their ability to create value and their previous SPAC track record of returns to shareholders.
So, in a sense, investing in a SPAC can be likened to investing in a venture capital firm as a limited partner.
The cost of that investment is roughly the same, 20% of the upside to the SPAC sponsor, but the time frame for realizing a significant gain can be far faster, a 1- to 3-year time period for a SPAC versus 10 or more years for a typical venture capital fund.
Also, unlike a venture capital fund, a SPAC is liquid, providing public investors with an added liquidity benefit should they need to sell.
In the case of this particular management group, there is no previous SPAC track record, which makes the investment high risk.
I tend to have a high bar of prior industry experience combined with a successful SPAC track record before getting very interested in a SPAC before it has announced a proposed merger partner.
Since Monterey’s leadership doesn’t have a successful SPAC track record, I’m on Hold for MCAC at the present time.
