Oct 25, 2022 - Economy

Paul Ryan sticks with SPACs

Photo illustration of Paul Ryan with a line chart and image of oil barrels

Photo illustration: Sarah Grillo/Axios. Photo: Mateusz Wlodarczyk/NurPhoto via Getty Images

Paul Ryan entered the SPAC market in mid-2020, alongside a slew of other big names from the power corridors of politics, business and entertainment. The difference is that he's stuck around, while so many others ran for cover.

Driving the news: Ryan on Tuesday will help ring the New York Stock Exchange bell, as the SPAC he chairs completes its merger with portfolio assets of Grey Rock, a Dallas-based oil and gas private equity firm.

History: Ryan's involvement ties back to his 2012 run for vice president, alongside Mitt Romney, prior to becoming Speaker of the House.

  • The SPAC, called Executive Network Partnering Corp., was formed by Solamere Capital, a private equity firm co-founded by Romney, son Tagg, and two campaign advisors. Ryan would first join the SPAC, and several months later become a partner at Solamere.
  • "Even prior to the SPAC market melting down, it felt there was a misalignment to how most SPACs were designed," Ryan tells me. "In a lot of them, the sponsors basically take economics on the day of the transaction and then walk away, which isn't a good alignment of interests... We wanted to do something more focused on long-term performance."
  • He adds: "I still have same the same conviction that I did at the beginning, that there's a place in the world for SPACs, if the proper alignment is there, because they can help public investors get access to fast-growing private companies."

Deal details: ENPC acquired a large portfolio of non-operated oil and gas assets from Grey Rock, located in five major U.S. basins. The resulting company will be called Granite Ridge Resources, and have a $1.2 billion enterprise value.

  • Granite Ridge is led by Luke Brandenberg, a veteran energy investor who has spent time with Grey Rock, EnCap and Vortus Investment Advisors.
  • Grey Rock will be majority shareholder following the merger, while Ryan and some other Solamere execs also will have equity stakes.
  • Investors already have expressed some deep skepticism, with 95% redemptions of ENPC units.

State of play: Ryan and Brandenberg argue that redemptions were driven by the same herd mentality that's hit other SPACs, with hedge funds (understandably) believing they can get the same assets cheaper post-merger.

  • ENPC also got dinged by traders because oil has traded down since the deal was cut.
  • "Obviously it would have been nice to stockpile cash to accelerate the strategy, but we'll still emerge without debt and it doesn't impact current cash-flow," Brandenberg says.

Politics: Ryan doesn't believe that next month's elections will have much impact on Granite Ridge's fortunes: "Congress may be better attuned to American oil and gas production, but you're going to have the same administration and the same regulatory footprint."

What to watch: If Ryan is proved right about interest alignment, and how Grey Rock and Solamere partners weigh that thesis against their liquidity goals.

Go deeper: Not so SPAC-tacular anymore

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