Paul Ryan sticks with SPACs

Paul Ryan sticks with SPACs

Paul Ryan sticks with SPACs

Driving the news: Ryan on Tuesday will help ring the New York Stock Exchange bell, as the SPAC he chairs completes its merger with portfolio assets of Grey Rock, a Dallas-based oil and gas private equity firm.

Deal details: ENPC acquired a large portfolio of non-operated oil and gas assets from Grey Rock, located in five major U.S. basins.
• Grey Rock will be majority shareholder following the merger, while Ryan and some other Solamere execs also will have equity stakes.

What to watch: If Ryan is proved right about interest alignment, and how Grey Rock and Solamere partners weigh that thesis against their liquidity goals.

Go deeper: Not so SPAC-tacular anymore

Paul Ryan entered the SPAC market in mid-2020, alongside a slew of other big names from the power corridors of politics, business and entertainment. The difference is that he’s stuck around, while so many others ran for cover.Driving the news: Ryan on Tuesday will help ring the New York Stock Exchange bell, as the SPAC he chairs completes its merger with portfolio assets of Grey Rock , a Dallas-based oil and gas private equity firm.History: Ryan’s involvement ties back to his 2012 run for vice president, alongside Mitt Romney , prior to becoming Speaker of the House.
• The SPAC, called Executive Network Partnering Corp., was formed by Solamere Capital , a private equity firm co-founded by Romney, son Tagg , and two campaign advisors. Ryan would first join the SPAC, and several months later become a partner at Solamere.
• “Even prior to the SPAC market melting down, it felt there was a misalignment to how most SPACs were designed,” Ryan tells me. “In a lot of them, the sponsors basically take economics on the day of the transaction and then walk away, which isn’t a good alignment of interests… We wanted to do something more focused on long-term performance.”
• He adds: “I still have same the same conviction that I did at the beginning, that there’s a place in the world for SPACs, if the proper alignment is there, because they can help public investors get access to fast-growing private companies.”Deal details: ENPC acquired a large portfolio of non-operated oil and gas assets from Grey Rock , located in five major U.S. basins. The resulting company will be called Granite Ridge Resources, and have a $1.2 billion enterprise value.
• Granite Ridge is led by Luke Brandenberg, a veteran energy investor who has spent time with Grey Rock , EnCap and Vortus Investment Advisors.
Grey Rock will be majority shareholder following the merger, while Ryan and some other Solamere execs also will have equity stakes .
• Investors already have expressed some deep skepticism, with 95% redemptions of ENPC units.State of play: Ryan and Brandenberg argue that redemptions were driven by the same herd mentality that’s hit other SPACs , with hedge funds (understandably) believing they can get the same assets cheaper post-merger.
• ENPC also got dinged by traders because oil has traded down since the deal was cut.
• “Obviously it would have been nice to stockpile cash to accelerate the strategy, but we’ll still emerge without debt and it doesn’t impact current cash-flow,” Brandenberg says.Politics: Ryan doesn’t believe that next month’s elections will have much impact on Granite Ridge’s fortunes: “Congress may be better attuned to American oil and gas production, but you’re going to have the same administration and the same regulatory footprint.”What to watch: If Ryan is proved right about interest alignment , and how Grey Rock and Solamere partners weigh that thesis against their liquidity goals.

Go deeper: Not so SPAC-tacular anymore