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Fifth Wall Acquisition Files for Its Third Real Estate-Focused SPAC


[Updated: Apr 20, 2021 ] Apr 20, 2021 by Matt Frankel, CFP
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The SPAC boom has certainly quieted down a bit lately. For the first few months of 2021, it wasn't uncommon for more than 10 of the blank-check companies to go public in a single day -- now we're seeing just a slow trickle of SPAC IPOs.

However, while things have settled down, some ambitious firms are still launching special purpose acquisition companies. One upcoming SPAC that might be of interest to real estate investors, in particular, is Fifth Wall Acquisition III, the third such SPAC sponsored by Fifth Wall Ventures.

The details

Fifth Wall Acquisition III filed with the SEC for an IPO of 25 million shares at $10 each, which implies it aims to raise $250 million. Upon completion of the IPO, the stock will trade on the Nasdaq under the ticker symbol FWAC. The company will be led by Brendan Wallace, co-founder and managing partner of Fifth Wall Ventures.

One particularly interesting detail about Fifth Wall Acquisition III is that only shares are being offered. When most SPACs complete IPOs, they do so in the form of units, which consist of a common share as well as a fraction of a warrant to buy an additional share at a later time. However, this SPAC will consist only of common shares, not warrants.

What about Fifth Wall's two previous SPACs?

As the name Fifth Wall Acquisition III implies, and as we mentioned earlier, this is the third SPAC IPO from Fifth Wall Ventures. Here are some details about the other two:

  • Fifth Wall Acquisition Corp I (NASDAQ: FWAA) completed its IPO in February 2021, during the height of the SPAC boom. The company sold 34.5 million shares and raised $345 million in the process.
  • Fifth Wall Acquisition Corp II filed for its IPO in March and filed amended paperwork in early April. It aims to raise $150 million by selling 15 million shares of stock in its IPO and anticipates trading under symbol FWAB on the Nasdaq. However, as of this writing, the second Fifth Wall SPAC has yet to complete its initial offering.

Like the newly filed SPAC, Fifth Wall's first two also don't have any SPAC warrants or units, only common shares. This may or may not be to avoid regulatory complexity, as the SEC recently launched an inquiry into the way many SPACs account for warrants on their balance sheets.

The key takeaway is that while this is the third SPAC Fifth Wall Ventures has filed for, it has yet to successfully take any businesses public through one of its blank-check companies. To be sure, these don't necessarily need to find their acquisition targets in order -- in other words, Fifth Wall Acquisition II could certainly announce a merger agreement before Fifth Wall Acquisition I. But unlike some other firms that are on their second or third SPAC, Fifth Wall doesn't exactly have a track record of finding acquisition targets.

Should you invest?

There's no easy answer here, and even if you want to invest, it's tough to make a case for choosing Fifth Wall Acquisition III over either of its two predecessors. The property technology, or proptech, SPAC universe is a little crowded at the moment, and it's highly unlikely that all of the currently outstanding blank-check companies targeting the space will be successful.

That said, one of the positive side effects of the SPAC boom cooling off is that premiums on pre-deal SPACs have all but evaporated. In other words, when Fifth Wall Acquisition III does go public, it will probably be available at a share price close to its $10 net asset value, which provides investors with somewhat of a margin of safety.

In short, if you're optimistic on the property technology space and have some extra cash on the sidelines, a SPAC like Fifth Wall Acquisition III could be worth considering. But there's little that makes this blank-check company stand out from its two predecessors, both of which will presumably be competing for deals.

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