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NEW YORK, Nov 30 (Reuters Breakingviews) – Companies going public via deals with blank-check firms are finding that they sometimes need to take a little off the top. Manscaped, a men’s grooming company specializing below the belt, announced a merger last week with Bright Lights Acquisition (BLTS.O). The deal can close even if shareholders pull their money out, while private investors including celebrity Channing Tatum are set to take a stake at a discount. Amid a difficult market, special-purpose acquisition companies are doing everything they can to keep the machine running.

A SPAC like the one that is buying Manscaped typically sells shares at $10 apiece, puts the cash in a trust account, then searches for a company to buy. Any merger they agree to is typically conditioned on some minimum amount of cash remaining in that trust, as well as a shareholder vote. However, a SPAC’s shareholders can choose to redeem their shares in return for cash. With redemption rates increasing throughout this year , as noted by SPAC Research, the risk grows that any given deal’s minimum cash condition might not be met.

Manscaped’s deal works around that risk. Bright Lights is on the hook for $75 million in cash, but that doesn’t have to come from the trust account. Rather, Tatum and others have agreed to backstop the deal with their investment. Even if public investors pull their cash, the deal could close.

The trouble is that the private investors are getting a bargain. They will take a stake at $9.20 per share. While bringing in private investors is supposed to be a vote of confidence, offering them a discount undercuts that.

Neither of these features is unique to Manscaped. Earlier this month, software company FiscalNote agreed to a SPAC merger that saw private investors promise to backstop redemptions. Elsewhere, electric-vehicle company Polestar agreed to sell shares at $9.09 each to private investors as part of its blank-check deal.

SPACs have already been criticized for their selective sweet deals. Aside from discounts, SPAC sponsors have been aggressive about offering rosy projections and further incentives like additional warrants to secure commitments from investors . A slowdown suggested public investors were becoming appropriately discerning about which deals were satisfactory and which left a little too much up to the imagination. Manscaped’s deal appears to shave the further protection of investor consent.

Men’s grooming products company Manscaped on Nov. 23 said that it had reached a deal to go public via a merger with blank-check company Bright Lights Acquisition, at a valuation of around $1 billion. As part of the deal, investors including Endeavor, Guggenheim Investments and actor Channing Tatum have committed to a $75 million investment at $9.20 per share.

– The deal comes after Bloomberg reported in July that the two sides were in deal talks, following a report in October 2020 that Manscaped was exploring a potential sale at a valuation of over $500 million.

– In an investor presentation Manscaped said that it expects to generate $290 million in revenue in 2021, growing to over $500 million in 2023. It reported around $10 million in adjusted EBITDA over the last 12 months.

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