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A Quick Take On Blue World
Blue World Acquisition Corporation (NASDAQ:BWAQ) has raised approximately $92 million from an IPO at a price of $10.00 per unit, according to the terms of its most recent S-1/A regulatory filing.
The SPAC (Special Purpose Acquisition Company) intends to pursue a merger with a company in the sectors of marine leisure, cruise, marine infrastructure and engineering, general hospitality, travel and tourism, marine services, logistics and supply chain, offshore energy solutions and related industry segments.
While marine industries present potentially interesting merger opportunities, uncertainties about the health of international trade are significant and management’s lack of direct operating experience or SPAC experience are problematic.
I’m therefore on Hold on the Blue World Acquisition SPAC.
Blue World Sponsor Background
Blue World has 2 executives leading its sponsor, Blue World Holdings Limited.
The sponsor is headed by:
– Chairman and CEO Liang Shi, who is a partner at investment firm Zenin.
– Chief Financial Officer Tianyong Yan, who is a General Manager at the Shanghai Green Storm Asset Management firm.
The SPAC is the first vehicle by this executive group.
Blue World’s Market
According to a 2021 market research report by Fortune Business Insights, the global marine vessel market size (as a proxy for all marine related markets) was an estimated $169 billion in 2020 and is forecast to reach $188 billion by 2028.
This represents a forecast CAGR of 1.43% from 2021 to 2028.
The main drivers for this expected growth are the impact of global maritime trade and related shipping demand, which is dependent on economic growth in international trade flows.
Also, the pandemic has reduced international trade and related activity during the core years of 2020 to 2021.
However, a ‘slow recovery in new shipbuilding contracts has been witnessed in 2021.’
Additionally, the recent widespread trade sanctions against Russian exports as a result of the war in Ukraine will likely have a dampening effect on trade in the near term.
Blue World’s SPAC IPO Terms
NY-based Blue World sold 9.2 million (including underwriter over-allotment options) units of Class A ordinary shares 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-half of one and one-tenth of one right warrant per share, exercisable at $11.50 per share on the later of the completion of an initial business combination and one year from the date that [the] registration statement is declared effective and expiring 5 years after completion of the initial business combination or earlier upon redemption or liquidation.
The SPAC has 21 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 378,480 units million warrants at $10.00 per unit in a private placement.
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 Blue World
The SPAC is interesting because it is targeting the marine and related industries, which management views as having significant potential for growth.
Management says it will not target a firm that has its primary operations in China, even though the sponsor firm is a Hong Kong company.
Neither leader of the sponsor appears to have direct operating experience in the industries that the SPAC is targeting, which is a negative.
Also, this is the first SPAC by management, so these executives have no discernible track record in creating attractive returns for shareholders of a SPAC.
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.
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.
While marine industries present potentially interesting merger opportunities, uncertainties about the health of international trade are significant and management’s lack of direct operating experience or SPAC experience are problematic.
I’m therefore on Hold on the Blue World Acquisition SPAC.
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