Athletes pitch Wall Street’s hot new toy, but not just to their fans

A view of the Wall Street sign in New York, February 12, 2015. (Photo: NYTimes)
Madison Avenue has long known that athletes can sell almost anything. From soda to sneakers to car insurance, consumers eagerly snap up whatever their favorite sweat-drenched star is pitching.اضافة اعلان

Now a growing number of big-name athletes are taking their talents to Wall Street. Super Bowl-winning quarterbacks like Patrick Mahomes and Eli Manning, tennis champion Serena Williams and basketball Hall of Famer Shaquille O’Neal are just a few of the stars lining up to sell SPACs — the so-called blank-check companies that are surging in popularity as an alternative way for buzzy startups, often with little or no profits, to go public.

But they are not just there to draw in dollars; athletes provide star power that can be a crucial asset when Special Purpose Acquisition Company’s (SPAC)— special purpose acquisition companies — are courting startups for a merger deal.

“Certain athletes carry a certain weight that gives them the ability to generate exposure and create buzz, whether it’s in the sports world or in the finance world — and so I think that that’s the ultimate motivation behind a lot of it,” said Ryan Nece, who had a seven-year career as a linebacker in the National Football League (NFL). Now he is a managing partner at the investment firm Next Play Capital, which has been approached about starting a SPAC but has no plans to do so — yet.

SPACs are in a race against the clock from the moment they make their shares available in an initial public offering. They generally have just two years to close a deal for a target company, or they must return the money raised from investors. And with SPACs being formed at a record pace, athletes can be useful partners when trying to close a deal — or simply getting a foot in the door.

Last year, 256 special purpose acquisition companies went public, raising $83 billion from investors, which was more than five times the record of $15.5 billion in 2019, according to Dealogic, a data provider. The competition has grown only more heated; 295 SPACs had gone public in 2021, raising $93 billion and breaking last year’s record in a matter of months.

About one-fifth of the SPACs launched since the start of last year involved a sports figure or focused on acquiring a sports-related business, according to the trade publication Sportico, which is keeping tabs on every new SPAC filing.

Kristi Marvin, founder of SPACinsider, which collects data on the market, said adding an athlete to a board brought marketing clout. “It’s really not geared to the retail investor, but it’s geared to getting meetings with target companies to do deals,” she said.

Consider a $300 million financing deal to complete the merger of NewHold Investment, a SPAC, with Evolv Technology. It included a number of hedge funds but also several famous athletes, such as tennis power couple Steffi Graf and Andre Agassi and soon-to-be Hall of Fame quarterback Peyton Manning. NewHold’s backers hope that adding star power to the deal will help attract customers for its crowd-screening technology, which is aimed at stadiums, arenas and schools, said a person who was briefed on the matter but not authorized to speak publicly.

Often, an athlete can be added to a SPAC’s board or advisory committee at little cost to the management group running it. Directors are usually compensated with shares, and some advisory board positions are unpaid until a deal gets done.

But some athletes are not content to merely add their names to someone else’s SPAC.

They include Colin Kaepernick, the former San Francisco 49ers quarterback, who is trying to raise $287 million for a SPAC with a focus on social justice, and Alex Rodriguez, a three-time most valuable player who retired from the New York Yankees in 2016 at Number 4 on the career home run list.

Rodriguez is chief executive of his own SPAC, Slam Corp, which he established in February, and may sit on the board of whatever company it acquires. He said he and his partners had already seen more than 70 potential targets after raising $500 million.

Raising money through a SPAC allows his investment firm, A-Rod Corp, to take on opportunities that were out of reach before, he said.

“What has been the barrier for entry for us has been capital — and this levels out the playing field,” Rodriguez said.

He and his partner in Slam Corp, hedge fund manager Himanshu Gulati, are looking to acquire a business in the sports, media or health and wellness industry — but not a sports team, he said. (Rodriguez was also an investor in the telehealth company Hims and Hers, which went public in a SPAC transaction valuing the firm at $1.6 billion last year.)

Forest Road, an investment firm, was the entry point for O’Neal, who was already an investor there when he contacted its chief executive, Zachary Tarica, about getting involved in its growing SPAC business. O’Neal was an adviser on its first SPAC, which last month announced plans to buy Beachbody, a digital fitness company, at a $2.9 billion valuation. He is now an adviser on a second Forest SPAC.

Kevin Mayer, a former Walt Disney and TikTok executive who advised the first SPAC and is helping lead the second, described O’Neal as “a real businessman,” although he cautioned against investing in a particular venture just because a famous person was involved.

“If anyone were to ask me, I say you should definitely not invest in this SPAC because there’s a sports star or any single person,” he said. “They should look at the totality of the investment.”