Issue No. 110: The SPACs are coming

Need-to-Know

Short for special purpose acquisition company, a SPAC is an investment vehicle.

A placeholder of sorts, these empty corporate shells are created for the sole purpose of going public, raising capital from investors, then merging with or acquiring a privately held business. In doing so, the takeover target bypasses the traditional IPO process.

Also known as a blank check company, at the onset, investors don’t actually know what they’re backing. Instead, they write a “blank check” to the management team, or sponsors, behind the SPAC, ultimately betting on their operational expertise and vision for a particular sector.

Earlier this year, pandemic-induced market volatility gave rise to a SPAC surge. Nine months later, there’s no end in sight.

By the numbers

• There has been more than $125B in SPAC activity this year.
• More than 242 SPACs were introduced this year, four times last year’s total.
• The average size of a SPAC in 2020 was $335M, 10 times the amount in 2009.

Now, as we prepare to turn the calendar to a new year, a growing number of SPACs are taking aim at emerging opportunities in fitness and wellness.

HumanCo Acquisition Corp.

With $250M to spend, HumanCo Acquisition Corp. (HMCO) is a newly formed SPAC that’s all-in on health and wellness.

HMCO is led by Jason Karp, the founder of healthy snack brand Hu and health-focused holding company HumanCo, working alongside CAVU Venture Partners, a leading “better-for-you” consumer goods investment firm. CAVU’s significant investments include Beyond Meat, Vital Proteins, and Thrive Market.

Of note, HMCO has assembled an impressive group of directors, including Kat Cole, the outgoing president and COO of Focus Brands —  the parent company of Cinnabon, Jamba, and Auntie Anne’s.

Affording itself great flexibility, HMCO’s website describes its focus area as being:

“…within consumer and technology markets, including food & beverage, household products & personal care, beauty & wellness, fitness, and nutrition.”

Aspirational Consumer Lifestyle Corp.

As the name suggests, this SPAC is looking for “businesses with premium brands that offer an aspirational lifestyle experience to consumers.”

Formed by private equity firm L Catterton and LVMH executives, the leadership team includes CEO Ravi Thakran, vice chairman Mark Bedingham, and president Lisa Myers. Listed under the symbol ASPL.U, the blank check company raised $225M in September.

Meeting its aspirational criteria, the New York Post suggested ASPL.U was considering taking Gwyneth Paltrow’s wellness brand Goop public.

For his part, Thakran said the SPAC will target premium consumer brands that have a focus on Millennials and Gen Z. Further, the company is eyeing trends that have matured in the US and Europe but have yet to gain steam in Asia, citing: “health, wellness, plant-based proteins, and milk alternatives.”

Hims x Oaktree Acquisition Corp.

In October, digital health startup hims announced it was going public through a reverse merger with Oaktree Acquisition Corp. (OAC), a SPAC formed by Oaktree Capital Management.

To date, hims has raised $272M in funding. Through the first nine months of 2020, the company earned $107.3M in revenue with net losses of $12.9M, down from $59.7M during the same period in 2019.

Expected to close in the near future, the OAC deal values hims at $1.6B.

Looking ahead, hims CEO Andrew Dudum told Business Insider the company could be “a natural consolidator,” acquiring companies that offer complementary treatments in areas like hypertension, sleep, and diabetes.

In related news, the healthcare sector is especially attractive to SPAC suitors. Social Capital CEO Chamath Palihapitiya is using a SPAC to take health insurer Clover Health public. And former Livongo executives are forming a $500M SPAC focused on health tech.

F45 Training Resets

Entering this year, boutique studio operator F45 Training intended to go public. Even after the pandemic hit, word of a reverse merger with Crescent Acquisition Corp, a publicly traded SPAC, showed promise.

But, the deal that would have valued F45 and its 1,900 studios at $845M wasn’t to be. Ultimately, a host of COVID-related challenges were insurmountable — both parties agreed to terminate the transaction.

While this SPAC came up short, the new year could see blank check companies hone in on the boutique fitness space. From F45 to Orangetheory Fitness, Xponential Fitness, and Barry’s, 2019 saw a handful of studios ready to transact. In 2021, we’ll have to see if operators are able to find their footing as gyms and studios reopen.

Looking Ahead

Whether it’s a SPAC, traditional IPO, venture round, or private equity backing, one thing is abundantly clear: fitness and wellness are top of mind among investors.

Combined with the fact that consumers are prioritizing personal well-being more than ever before, the $4.5T wellness industry will enter a new stratosphere, creating new opportunities for operators, like… well, all of us.

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🎙 On the Podcast

This week, on the Fitt Insider podcast, we’re joined by Jason LaRose, CEO of Equinox Media.

A subsidiary of Equinox Group, operator of brands including Equinox health clubs, Equinox Hotels, SoulCycle, and Blink Fitness, Equinox Media develops technologies, media, and experiences for fitness seekers.

In this episode, we discuss:

• SoulCycle’s at-home bike
• Variis by Equinox, the company’s digital platform
• The role of instructors, music, and community in producing fitness content
• Why Jason believes Equinox will thrive in an omnichannel fitness environment

Listen to Episode 62 here.

💰Peloton x Precor

Yesterday, Peloton announced it is acquiring Precor in a $420M deal.

Based in Seattle, Washington, Precor is a leading manufacturer of fitness equipment. Primarily focused on the commercial sector, Precor helps Peloton shore up its supply chain while creating a new business segment.

US manufacturing. The inability to meet consumer demand has hampered Peloton. With Precor, the company adds 625K square feet of US manufacturing space complete with in-house fabrication, product development, and quality assurance.

New products. Whether it’s a long-rumored rower, Mirror-like competitor, or strength-focused hardware, a team of 100 research & development employees from Precor are joining Peloton, bolstering the company’s ability to bring new products to market.

Commercial equipment. For Peloton to fill out its $40B market cap, it had to expand beyond the home. Thanks to Precor’s existing business, Peloton can now compete with the likes of Life Fitness, Technogym, and Nautilus for a larger piece of the overall equipment pie.

Reimagining omnichannel. Across the fitness industry, gym and studio operators have high hopes for an omnichannel or hybrid future where gym-goers supplement in-person exercise with a digital offering, bundled with the facility’s membership.

But as we pointed out in Issue No. 89, omnichannel isn’t a sure thing. As we predicted, digital-first brands are backing into brick-and-mortar, co-opting customers in the process.

If Peloton can hook would-be customers in a neighborhood gym, on a college campus, or in an apartment building, fitness seekers might be more inclined to buy a Peloton of their own — or at least download the app and create an account. The same goes for Apple, who’s bundling Fitness+ with gym memberships as a path to acquire customers.

Punchline: Peloton x Precor is the headline, but behind the scenes, the balance of powers continues to shift from brick-and-mortar operators to digital disruptors who are charting a new future for fitness.

🥗 Suburban Salad

Salad chain Sweetgreen plans to open a drive-thru restaurant in Highlands Ranch, Colorado next year. A move accelerated by the pandemic, the company plans to move beyond cities and into suburban areas.

Founded in 2007, Sweetgreen has raised more than $500M in funding. Its most recent investment, a $150M round in September of 2019, valued the company at $1.6B.

A favorite among city-dwellers and office-goers, Sweetgreen took a hit as work-from-home became the new normal. Recent months took a toll on the salad operation:

• Sweetgreen laid off 20% of corporate employees.
• Some locations saw business decline by 40–80%.
• The chain closed or consolidated 21 of 105 restaurants.

Looking ahead: Despite opinions declaring the death of the $15 salad, Sweetgreen hopes its digital app, accounting for 70% of orders during the pandemic, and drive-thrus can help right the ship as we put 2020 behind us.

📣 Share Your Suggestions

As we head into the new year, we’re lining up guests for the Fitt Insider podcast. Is there someone you’d like to hear on the show? Share your recommendations by leaving a comment here.

📰 News & Notes

• A bicycle from Rogue Fitness.
• On Running’s high-tech NYC flagship.
• Strava unveils its Year in Sport report.
• Performix House will close its studios in NYC and LA.
• DICK’S Sporting Goods teams with Instacart for same-day delivery.
• Mirror introduces “friending.” [Listen in: our interview with Mirror CEO Brynn Putnam]

💰 Money Moves

• Leading connected fitness platform Peloton acquired Precor, a commercial exercise equipment manufacturer, for $420M.
  More from Fitt Insider: How Peloton Became a Billion-Dollar Business
• Oscar Health, a tech-driven health insurance startup with $1.6B in funding to date, filed for a 2021 IPO.
• Mental wellness startup Lyra Health, creators of a platform serving the well-being of employees, raised $175M at a $2.25B valuation.
  More from Fitt Insider: Peak Burnout
• Zero-calorie, stevia-sweetened beverage maker Zevia closed a $200M investment from Canadian institutional investor CDPQ.
• Blue Wire, creators of long-form sports narrative podcasts, secured $5M in a Series A round led by Dot Capital.
• Natural movement footwear manufacturer Xero Shoes landed an undisclosed strategic investment from TZP Group. 
• FoodMarble, an Irish foodtech startup tackling digestive health, landed €2.1M ($2.57M) in a seed round led by Business Venture Partners.
• Mental health startup Sesh, providers of digital group support services, closed $3M in a seed round led by Polaris Partners. 
• Egg Innovations, a vertically integrated producer of pasture-raised, free-range eggs, acquired PECKISH, makers of pre-packaged hard-boiled egg snacks, in an all-stock deal.
• Singaporean biotech firm TurtleTree Labs, producers of a cell-based milk product, raised $6.2M in an oversubscribed Pre-A round from Green Monday Ventures, KBW Ventures, and others.
  More from Fitt Insider: The Quest for Cow-Free Milk
• Vegan restaurant chain by CHLOE. filed for Chapter 11 bankruptcy.