Former Boeing CEO Eying the Hot SPAC Market

Dennis Muilenburg, the former CEO of Boeing who stepped down in December 2019, during the 737 Max crisis, is getting back to business.

However, not as chief executive officer of another multinational company.

According to Bloomberg’s report, he’ll fill in the next few days for a special-purpose acquisition company, or SPAC.

The goal is to raise about $200 million to invest in companies focused on futuristic transportation.

In December, Muilenburg was advising a robotic tractor maker, a Silicon Valley startup called Monarch Tractors, which was co-founded by a former Tesla executive.

Muilenburg, who joined Boeing in 1985 as an engineering intern, was ousted in the middle of one of the biggest crises in Boeing’s more than 100-year history.

After two crashes that claimed 346 lives — in Indonesia in October 2018 and Ethiopia in March 2019 —, all 737 Max aircraft around the globe were grounded for about 20 months, since March 2019.

It was discovered that a problem in a safety feature caused the crashes. Since the accidents, Boeing shares fell about 50%, and the American company lost the crown as the world’s largest plane maker to Airbus.

The type of venture Boeing’s former CEO is eying now became a hot market in 2020.

SPACs are companies that don’t have any commercial operations and are created with the sole purpose of raising capital from investors to buy one or more firms. This is why it’s also called a blank-check company.

Data from the site SPAC Insider shows there were 248 SPACs that, together, raised $83 billion last year, almost the same as traditional IPOs, that in 194 offerings raised $67 billion.

Last year SPACs raised more money than in the previous decade, and in 2021 the influx of cash continues to be strong.

Up to January  22, there have been 67 SPACs, totaling $19 billion in gross proceeds.

Since SPACs don’t have a track record to show to investors while raising money, it’s vital to have reputable names in management.

The Sri Lankan-born Canadian-American venture capitalist Chamath Palihapitiya, who was an early senior executive at Facebook, is credited, at least in part, for the recent SPAC boom.

In 2017, he raised $600 million for his first SPAC, the Social Capital Hedosophia Holdings. With the money, the blank-check firm bought a 49% stake in the British spaceflight company Virgin Galactic two years later.

In July 2020, Bill Ackman’s SPAC Pershing Square Tontine Holdings raised $4 billion in capital, making it the biggest SPAC on record so far.

Typically, after raising money with investors, SPACs have two years to invest the funds by buying prominent startups. 

The early investors can have huge returns, but there is always a risk. Management costs are frequently high, and some experts warn that bubble preconditions are already in place.