SPACs, or special-purpose acquisition companies, are making a comeback in the energy space. For years, many investment bankers wouldn't underwrite funding for companies that used the vehicle to raise equity, because earlier versions of it mimicked blind-pool trusts. Those loosely structured investment vehicles were often led by inexperienced management teams that failed to execute a profitable business plan. And all too often, these teams rode off into the sunset with the equity capital they raised, leaving confused, angry investors in their wake. "These vehicles had very bad DNA in the past," says Dick Prins, a Baltimore-based managing director with Ferris, Baker Watts Inc. "In those days, a blank check would have a promoter and there were no rules about how the capital might be spent. When a blank check would float, a promotional press release would be issued and the stock price would react, only for the insiders to begin selling the shares they received as part of the promotion." The SEC has since tightened the reins on these kinds of investment vehicles to protect investors against fraud, including requiring that SPACs file financial statements. Recently, several E&P and oil-service veterans have decided to give the SPAC vehicle a try. And, well-known energy-investment banks are taking them to public markets. For more on this, see the March issue of Oil and Gas Investor. For a subscription, call 713-260-6441.

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