James Bond, Matrix Special Effects Firm Goes Public in $1.6 Billion SPAC Merger

The Daily Upside TeamJanuary 26, 2022

One of Hollywood’s most renowned special effects companies is jumping from the ones and zeros of coding The Matrix to the statistical frenzy of stock indexes.

DNEG — whose visual creators have won Academy Awards for work on Tenet, Inception, and Blade Runner 2049 — announced Tuesday that it’s combining with a special-purpose acquisition company (SPAC) to go public with a $1.6 billion valuation. The details are below (spoiler alert).

Coming Transactions

A quick refresher on SPACs, because it’s been a while. Also known as “blank check companies,” they raise money from investors and list on a stock exchange for the sole purpose of merging with a private company that wants to go public. In theory, this allows companies to avoid the regulatory hassles and paperwork of a traditional IPO. In reality, shares of merged SPAC companies have tumbled as regulators have stepped up scrutiny and investors have pulled out of tech-driven, early-stage companies. Shares for half the companies that merged with SPACs in the last two years are down 40% or more, amounting to billions in losses.

DNEG, which also did the effects for the recent James Bond blockbuster No Time Left to Die and The Matrix Resurrections, will merge with a SPAC called Sports Ventures Acquisition. While the blank check merger path is a fraught one, the company is convinced its magic will work on the trading floor:

The streaming wars are about to power never-before seen demand for special effects: the nine leading streaming companies — including Netflix, Disney, Warner Bros, Amazon, Comcast, and Apple — are expected to spend $140 billion on content in 2022 alone, according to a recent Wells Fargo analysis.
Effects companies are highly coveted because of their potential for the metaverse, a future internet world powered by avatars and online worlds — last month, video game maker Unity Software paid $1.6 billion for special effects studio Weta Digital, famous for its work on the Lord of the Rings movies.

Seeing is Believing: “I’ve never seen this type of demand uptick and a push toward quality and scale in the industry,” Namit Malhotra, DNEG’s CEO, told the Wall Street Journal. “We’re on a massive expansion spree.”