The 2018 IPO market has gotten off to an eventful start. There was the announcement that Spotify would not launch an IPO, but rather use a direct listing which could set a major precedent for other large companies looking to go public. And now then there is the IPO of Platinum Eagle Acquisition Corp (NASDAQ:EAGLU), a special purpose acquisition company (SPAC). Variety reports that veteran Hollywood executives Jeff Sagansky and Harry Sloan sold 32.5 million shares at $10 per share and “will be looking to invest in media companies.”
Investing in media companies may sound mundane, but there are a lot of weird questions about this IPO as well as the two executives running it. Platinum Eagle wants to say that it will invest in media companies, but it has no history and the two executives have run many, similar enterprises with practically the exact same name which have had dubious success at best. There is currently no reason to do anything but stay as far away as possible from this stock.
A Business with No Past
When I said that Platinum Eagle has no history, I did not mean that this company has accomplished only a little. I mean that this company has no history at all.
The company’s own SEC report states that “We are a newly incorporated company with no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective.” In most IPOs, companies use their histories to convince investors to give them money. Platinum Eagle by contrast “will not commence operations until obtaining funding through this offering.” Furthermore, Platinum Eagle has just $242,088 in total assets.
Okay, so Platinum Eagle has not accomplished much. What do they plan to accomplish? If they intend to invest in media companies as noted above, which companies are they targeting?
Once again, there is no good answer. Platinum Eagle states that “We have not selected any business combination target and we have not, nor has anyone on our behalf, engaged in any substantive discussions, directly or indirectly, with any business combination target with respect to an initial business combination with us.” The Variety article linked above quotes Sagansky as talking about how the rising importance of streaming played a decision in launching this SPAC, which would be a nice target.
But this remains too vague, and Platinum Eagle stresses how they are not limiting themselves to any geographic region or industry – which also means that they are not targeting any specific industry which could be judged. In summation, Platinum Eagle is a company with no assets, no operating history, and no clear path towards success. Why should investors give them money?
The Strange History of Sagansky and Sloan
Platinum Eagle is not selling their history of success, because they do not have any. What they are selling is the storied history of Sagansky and Sloan, two experienced and successful Hollywood executives with a history of successful acquisitions. Or rather, that is what they want us to believe.
This is actually the fourth IPO which Sagansky and Sloan have launched. In 2011, 2013, and 2015, those two founded Global Eagle Entertainment Inc (NASDAQ:ENT), Silver Eagle, and Double Eagle and raised $190 million, $325 million, and $500 million in those IPOs respectively. In fact, one can find a Variety report in 2015 about Double Eagle which reads remarkably similar to the Platinum Eagle article above.
In each case, the company made an acquisition two years later of a media company. Global Eagle, for example, purchased two companies which let them move into in-flight entertainment. Silver Eagle purchased 38.3 percent of shares of Videocon D2H Ltd (NASDAQ:VDTH), an Indian TV company.
These companies do show that Platinum Eagle, at some point, will be able to acquire a media company with personal loans. But these companies have not exactly set the world on fire since acquisition. Videocon for example, has seen its stock fall in value from $12.78 about 18 months ago to $8.15 today. Meanwhile, Global Eagle’s stock value today is at just $2.09. It will take years until Platinum Eagle makes any acquisition, and it is by no means guaranteed that it will succeed given how Sagansky and Sloan have failed in the past. Even if you have the slightest interest in this company, there is no need to give them your money now. And there are far more reasons to stay away altogether than to wait, let alone invest now.