EverArc Holdings EVRA
December 09, 2019 - 10:35am EST by
2019 2020
Price: 10.00 EPS 0 0
Shares Out. (in M): 30 P/E 0 0
Market Cap (in $M): 300 P/FCF 0 0
Net Debt (in $M): 0 EBIT 0 0
TEV (in $M): 0 TEV/EBIT 0 0

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  • Special Purpose Acquisition Company (SPAC)
  • Berkshire2.0


I just want to begin with the thesis, which is simple: Nick Howley, former CEO of Transdigm (TDG), has created $Bs of value for shareholders and this is his next meaningful business venture.

Here's some more details on why EVRA is something we're excited about and how we think about it.  We recognize the many risks and consensus negativism as it relates to investing in SPACs.  We have never invested in SPACs nor have we ever spent time looking at SPACs.  Until now.

When this SPAC came along, we stopped worked on everything else and prioritzed this project.

The thesis that is central to so many of the most successful investments we have made as fundamentally driven investors (and for companies we have not been involved with but have admired) is simply A+ management team.  Individuals that have clear vision, scrappiness/entrepreneutial qualities to execute on the vision, honesty, high values, and importantly, a proven track record of doing all of the previously listed things and creating value for him or herself and most impotantly, we as shareholders.

Some of the very best investments are investing with some sort of an overhang or controversy and believing that the A+ management team will continue to do what they've always done, which is execute; it is a matter of time when the management will more than exceed the current (generally negative and minimal) expectations.

We think that somewhat frames this security well: SPACs are largely unloved vehicles for many reasons that are all known and the sentiment that the incentives of the sponsors are not aligned with the shareholders.  In a sense, that creates the question marks and to a certain extent, an overhang (should I look into this?  Could we invest in this?  I don't even know what SPACs are!)

In this case, unlike many other SPACs, Nick and his co-sponsors have adjusted many of the sponsor incentives so they are as aligned as possible with shareholders.  There are many examples of how this SPAC is much more shareholder friendly.  One example: Nick will only receive shares as incentives, not cash compensation.  Given Nick's net worth, for him to make this his next meaningful business venture post-TDG proves he believes there is meaningful ways to create value.  In our conversations with him, we are very comfortable that this venture is one where he is both highly engaged and incentivized.

This isn’t all. The rest of the sponsors are world class with strong tracks records for investment success and reputations for honesty:

Will Thorndike: well regarded middle market private equity investor (at a well-regarded firm called Housatonic) who has a stellar investment track record based on our conversations with LPs who have been interested in his funds. And a glowing reference check with all individuals who have interacted with him. World class reputation. https://housatonicpartners.com/team/william-n-thorndike-jr/

Haitham Khouri: seasoned hedge fund investor who helped grow Hounds Partners into what it is today. Haitham was a partner at Hound (the only partner excluding Jonathan Auerbach, the founder) and our reference checks on him have been outstanding. Instead of going out and raising likely a $500M+ to $1B inaugural HF, he is making this his next business venture. We are most excited about Haitham given he is young, hungry, scrappy, and he “gets it.” https://www.linkedin.com/in/haitham-khouri-6a0ba66/

Tracy Britt Cool: spent many years working at Berkshire Hathaway. Based on our diligence, Haitham and Tracy overlapped at Harvard Business School. We feel comfortable that Tracy will be able to provide proprietary deal flow and unparalleled access to unique situations for this sponsor.  We think that Tracy's role at Berkshire Hathaway is largely being a board member and less on the actual investing side.  This is somewhat similar to individuals that Icahn hires--to fill in board seats versus actually make investments (e.g. Jonathan Christodoro, who basically just sits on boards and reports back to Icahn).  While we believe individuals who fill board seats for a fund's principal, like Tracy, Jonathan, etc., generally lack the investment know-how and are unlikely to be great investors, we think Tracy will play a crucial role in providing the funnel for interesting deals that fit the investment frameworks of Nick, Will, and Haitham.  

In short, some of the best investments we have made and those we have seen made by others are ones where you can't really say, "The company will be X in Y years."  Therein lies the risks .  To us, therein also lies the opportunity.  The sponsors of this SPAC are honest, have a stellar track record, and are highly incentivized. While we don’t know what this sponsor group will ultimately invest in, we truly feel like this could easily be a 10x in 3 years ($3B in 3 years coming from an offering of $300M). We don’t have any way to prove this nor can we. But when we draw on our decades of investing experience, this scenario is one where we are most highly excited about this very moment all because of the team.

For an actionable next step perspective:  the stock is still in book building phase and prices this week. EVRA is the ticker for the common shares and EVWA are the warrants.

Our best guess is that the IPO allocation will be largely taken up by groups that are already close to the story.  And likely these groups are also investing in SPACs for the very first time!

While it will be hard to get an IPO allocation, we think there is no better time to get involved than when EVRA first becomes public this week because right now, EVRA is a largely overlooked security given its SPAC heritage and the fact it trades on the LSE.  Also, our analysis of SPACs suggests that SPACs are largely illiquid for institutions after the 1st 2 trading days given the vehicle is just invested in treasuries.  To that end, to have a position that makes sense means that one will have to buy the shares the first day.

When it does become discovered, we wouldn’t be surprised if it trades up meaningfully above the $10 floor (for those new ot SPACs, the $10/shr valuation is protected due to the treasuries the shares are invested in).


I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.


Public listing 12/12 on LSE

Liquidity will likely be low after the first day of trading and important, should this be of interest, to be involved on the first day

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