Ex-SAC Manager Jason Karp Joins SPAC Rush With Wellness Deal

(Bloomberg) -- Two years ago, Jason Karp exited the hedge fund industry after deciding it was based on a broken model. He’s found a structure he likes better: the SPAC.

HumanCo Acquisition Corp., the blank-check company Karp formed with Cavu Venture Partners, raised $250 million in a stock sale on Tuesday. Now begins the search for a closely held business in the health and wellness industry they can take public via a reverse merger.

Karp, who once worked as a portfolio manager at Steve Cohen’s SAC Capital Advisors, said in an interview he shouldn’t be lumped in with the “rich and connected guys” cashing in on enthusiasm for special purpose acquisition companies as a “side hustle.” He sees opportunity in the growing demand for publicly traded companies with a focus on healthy living and commitment to sustainability. HumanCo’s SPAC can help satisfy that demand.

“When you add up all the ESG and mission-driven money, plus all the Gen-Zs trading like mad on Robinhood who want to own these stocks, the few options that exist get bid up very quickly,” Karp, 44, said. “We can properly identify one of these great growth companies, provide key know-how, shepherd it public and create something unique.”

Karp points to Beyond Meat Inc.’s 2019 initial public offering as the “inflection point.” Within three months, the stock surged almost 10-fold and today the maker of plant-based meat substitutes has a market value of about $9 billion. The success of IPOs this year by Vital Farms Inc. and Laird Superfood Inc. validates the thesis, Karp said.

Meantime, SPACs have become one of the hottest products on Wall Street. So far in 2020, more than $74 billion has been raised in SPAC sales on U.S. exchanges, and the bonanza has drawn in a wide cast of characters, from billionaire investor Bill Ackman to baseball executive Billy Beane. Nikola Corp., the electric truck developer, went public via a SPAC, and other possible deals include investment bank Perella Weinberg Partners Group.

After two decades in hedge funds, including four years at SAC Capital and six building his own firm, Tourbillon Capital Partners, to $4.5 billion in assets, Karp had no plans to return to life in the public markets. He shuttered New York-based Tourbillon in 2018 and moved to Austin, Texas, to invest privately in health and wellness as well as keep building Hu, the chocolate and snacks business he had co-founded.

Karp said he hadn’t thought of raising a SPAC until a Citigroup Inc. banker proposed the idea about six months ago. With the right people and expertise, it could appeal to company founders, many of them idealistic, who refuse to sell to large conglomerates or to private equity.

“There are few investors these founders can relate to,” Karp said. “If we’re competing with other sources of capital, I think we’ll win every day of the week.”

To complement his markets and finance background with know-how in product awareness, brand building and customer loyalty, Karp brought in Cavu, the venture capital firm behind health-oriented consumer products such as Beyond Meat, Bai drinks and Vital Proteins collagen supplements. And he recruited a board with relevant experience, including directors who had run Green Mountain coffee and Annie’s snacks.

Cavu co-founder Rohan Oza also commands attention as a regular guest on “Shark Tank,” the reality TV show. He’ll be co-chairman of HumanCo alongside Karp.

Tuesday’s SPAC offering at $10 a share was about five times oversubscribed, with orders topping $1 billion, according to a Citigroup memo reviewed by Bloomberg. HumanCo rose to $10.75 on Wednesday, an unusually large first-day gain for a SPAC.

With almost $275 million to spend -- the IPO proceeds and a $25 million investment by one of Cavu’s VC funds -- HumanCo is looking for a business in one of six markets: food, beverages, personal care, nutrition, beauty and wellness technology. The plan is to find a target with an enterprise value of at least $800 million, Karp said.

“Covid-19 accelerated our desire to do this,” Karp said. “People are so much more aware of the importance of their health.”

©2020 Bloomberg L.P.