Ticket marketplace SeatGeek is no longer going public via a merger with RedBall Acquisition Corp., the blank-check company led by Gerry Cardinale and Billy Beane.
The two sides announced Wednesday morning that they “mutually agreed” to terminate the $1.35 billion deal, hours before RedBall shareholders were set to vote on the business combination. The companies cited “unfavorable market conditions” as the reason for abandoning the deal, which was originally announced last October and projected to close in the first quarter of this year.
RedBall shares (NYSE: RBAC), which fell 7% on Tuesday, were up 6% in early trading on Wednesday.
“With such a choppy market it didn’t make sense for us to follow through with the SPAC,” SeatGeek CEO Jack Groetzinger said in a statement. “We made this decision to ensure SeatGeek continues to be in an optimal position of strength to pursue our growth strategy. We have tremendous momentum going into the second half of this year and are exploring other options to help us deliver on our mission of helping people experience more live.”
It’s unclear if the company plans to pursue a traditional IPO, raise money privately or seek a deal with a different special purpose acquisition company (SPAC).
The deal’s collapse is the latest blow to what was once a red-hot SPAC market. RedBall saw strong investor demand when it raised $575 million in its August 2020 IPO, becoming the first sports-focused blank-check company in more than a decade.
Others quickly joined RedBall. With public markets surging, investors across sports and entertainment rushed to gather pools of money—some forming multiple SPACs—looking for private companies that they could take public. Industry deals in the last few years include mergers involving DraftKings (Nasdaq: DKNG), Vivid Seats (Nasdaq: SEAT) and Genius Sports (NYSE: GENI). Each of those stocks is down on the year.
Once one of the hottest investment vehicles on Wall Street along with meme stocks, SPACs have suffered from an overabundance of blank-check companies on the market—680 have come to market since the start of 2021—and overly optimistic business projections pitched to investors on closed deals. That turned the market against SPACs, with an average of 85% of shareholders opting to pull their money at merger votes.
RedBall had a shareholder meeting scheduled for Wednesday morning to approve the proposed SeatGeek business combination. That meting will still happen, as required by law, the two sides said, but the transaction will not be put forward for consideration.
The result leaves RedBall in a difficult spot. Under the terms of coming public, RedBall has until mid-August, 24 months from its IPO, to complete a business combination or it must return the $10 per share IPO funds back to shareholders. The SPAC can ask shareholders to vote for an extension, but would have to allow them to redeem their shares for trust money at that time. RedBall probably would also need to offer shareholders additional incentive to continue, such as extra money into the trust account. RedBall warrants are down 80% Wednesday, an indication that the market doesn’t expect the SPAC to find another deal
SeatGeek was founded in 2009 as a mobile-first ticketing platform. The company’s prior investors include Eli and Peyton Manning; Carmelo Anthony’s Melo7 Tech; the rapper Nas; Elysian Park Ventures, the fund backed by the owners of the Los Angeles Dodgers; and Causeway, whose principals include Boston Celtics owners Wyc Grousbeck and Mark Wan.
This is the second potential deal for RedBall that has fallen through. In 2020, the group was in advanced talks to merge with Fenway Sports Group, the parent of the Boston Red Sox and Liverpool FC. That deal fell through, and Cardinale’s RedBird Capital later purchased 10% of the company.