Foulkes Filed With SEC to Launch $296M “Blank Check” Company As She Geared Up for RI Governor Run
Wednesday, October 27, 2021
Helena Foulkes filed SEC paperwork for her new SPAC as she was organizing her RI gubernatorial campaign. PHOTO: Foulkes campaign
The company's filing states it intends to have an initial public offering totaling $296 million.
When asked about the initiative, Foulkes' campaign said that she has stepped away from BrightSpark Capitol, but could not explain why the SEC documents do not reflect the change.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTFoulkes is running in the Democratic primary for governor of Rhode Island.
Controversial SPAC Space
A blank check company is known as a special purpose acquisition company (SPAC) -- a de facto shell company structure that is drawing strong criticism from SEC Chair Gary Gensler and Wall Street titans like Warren Buffett.
Gensler said in testimony before the House of Representatives Committee on Financial Services, “I believe that the SEC, working with the [Commodity Futures Trading Commission] and others, can stand up more robust oversight and investor protection around the field of crypto finance.”
As for SPACs, Gensler said he has asked staff for recommendations on how to boost disclosures in those investments, as there are “a lot of fees and potential conflicts inherent within SPAC structures.” Because of that, Gensler said he thinks investors need better information to understand the costs and risks.
Berkshire Hathaway's Buffett has also addressed SPACs.
"SPACs have been working for a while and if you secure a famous name on it, you could sell almost anything," Buffett said at the annual meeting in May.
Buffett's longtime business partner Charlie Munger called SPACs "a moral failing."
"It's not just stupid, it's shameful," Munger added.
"It seems almost everyone who is anyone is 'sponsoring' or setting up a SPAC, from ex-Trump adviser Gary Cohn to basketball star Shaquille O’Neal to Hong Kong tycoon Richard Li. But, as my recent paper shows, signs beyond the headline figures suggest that SPACs are a bubble about to burst," according to an article in the Harvard Business Review in February of 2021 entitled, "The SPAC Bubble Is About to Burst" by Ivana Naumovska.
"Under the rules governing them, SPACs must identify firms they can merge with within 24 months after they have raised their funds or they will be wound up and the IPO proceeds returned to investors. More than 300 SPACs need to pull that off this year or risk being liquidated. But with only so many quality targets to go round, and SPAC founders’ strong incentive to close deals — even at the expense of shareholder value — SPACs may well end up in a negative spiral of poor quality/bad press/tighter regulation. And we know how that ended for reverse mergers," writes Naumovska.
SPACs have attracted the attention of Congress.
In late September, United States Senators Elizabeth Warren (D-Mass.), Sherrod Brown (D-Ohio), Tina Smith (D-Minn.), and Chris Van Hollen (D-Md.) sent letters to six creators of prominent SPACs, raising concerns about abuses by the creators and operators of SPACs, including reports that insiders are taking advantage of legislative and regulatory gaps at the expense of ordinary investors.
“We seek information about your use of SPACs in order to understand what sort of Congressional or regulatory action may be necessary to better protect investors and market integrity and ensure a fair, orderly, and efficient marketplace,” wrote the senators to each of the SPAC creators. “We are concerned about the misaligned incentives between SPACs’ creators and early investors on the one hand, and retail investors on the other.”
In recent years, SPACs outpaced traditional IPOs as the preferred method for taking a company public.
The Senators assert that "Industry insiders may be able to take advantage of retail investors throughout the SPAC process to the benefit of large institutional investors such as hedge funds, venture capital insiders, and investment banks: SPAC creators, or 'sponsors,' have incentives to quickly strike merger deals, regardless of the quality of the deal or of the company to be acquired; early investors (often investment banks and hedge funds) are essentially guaranteed risk-free investments; both sponsors and early investors profit from hyperbolic, pre-merger claims about the company to be acquired; and retail investors who purchase shares based on those hyperbolic claims are often left with devalued shares."
Foulkes' Company "Isn't Open"
Under the construct of the deal as filed with the SEC, Foulkes' Arlington, VA-based company plans to raise $200 million by offering 20 million units at $10. Each unit will consist of one share of common stock and one-fourth of a warrant, exercisable at $11.50. At the proposed deal size, BrightSpark Capitol will command a market value of $250 million but with the total value of warrants the "Proposed Maximum Aggregate Offering Price" will top $296 million.
BrightSpark Capitol planned to list on the Nasdaq. Goldman Sachs had been shopping the deal to potential investors as the sole bookrunner.
Foulkes's campaign manager Emma Caccamo said in a statement, “In the spring of this year, Helena worked with another woman business leader on a business idea focused on women’s wellness. They filed some of the necessary legal paperwork in March, but did not actually turn the business idea into reality because Helena decided to begin considering a bid for governor. The company isn’t open, only these legal filings from March, so it never received investment. Helena stepped away from the business idea in April and has not been involved since."
“Helena’s understanding of how to develop businesses, especially ones that promote women and create jobs, will be an asset to Rhode Islanders. Helena is running for governor because Rhode Island needs experienced and innovative leadership that looks at issues from every viewpoint, makes the tough decisions, and gets things done. That’s exactly what she’s done in her business career, and that’s why she’s running for governor,” said Caccamo.
The campaign could not say why the filings with the SEC had not been rescinded or why BrightSpark was not listed as inactive.
Foulkes, who is listed as Co-CEO and Co-Chairman is joined by Co-CEO and Co-Chairman Marla Beck, who co-founded Bluemercury in 1999 and currently serves as CEO. BrightSpark Capitol stated it intended to focus on differentiated, digitally forward consumer businesses, including those in the health, wellness, and beauty sectors.
The other two founders in the company are Dyson Dryden and Mark Ein. The two are partners in the firm Capitol Investment.
Some of Ein's previous ventures have been controversial. Inman reports that another Ein SPAC deal has hit difficult times.
"Digital title, escrow and closing provider Doma raised less than anticipated in a SPAC merger this week, after paying out nearly $295 million to early investors who redeemed their shares before their value plunged by 30 percent after the merger was consummated," according to Inman.
Ein has had an affinity to the Trumps.
According to Washingtonian magazine, "Ein has talked about the President before. That Post piece cites a 2012 interview with Ein in which he said Trump was among his inspirations as a youngster – “sort of an icon when I was growing up.” It continues: 'I think his family — I actually know some of them — I think they’re terrific,' Ein said, describing Ivanka Trump as 'amazing' and her husband, Jared Kushner, as a 'great guy.'"
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