We ourselves were none too sure about these weird-fangled "blank check" IPOs, but now that Goldman’s doing it, it looks like it’ll soon be right up there with baseball, mom and apple pie. Read on for which company finally inspired the G-men to tip their hand.

Goldman Sachs Group Inc. filed plans for its first "blank check" IPO, outlining a deal that will raise $350 million and make significant changes to the typical structure of such offerings.

As the only major U.S. investment bank that hasn't underwritten a blank-check initial public offering in the past three years, Goldman Sachs's entry into the segment adds legitimacy to a structure that was considered suspect by much of Wall Street until about 2005.

Goldman's plans, outlined in a Securities and Exchange Commission filing for a company called Liberty Lane Acquisition Corp., also tinkers with the format that these deals normally take.

Blank-check companies, also known as special-purpose acquisition companies, or SPACs, begin life as empty shells, raise money through an IPO, and strive to acquire an operating business. Liberty Lane's offering, which has not set a launch date or ticker symbol yet, puts a deadline of two years for its management to complete an acquisition, a typical time frame built into most SPACs.

Goldman's SPAC -- which will be led by Paul M. Montrone and Paul M. Meister, currently at the helm of private-equity firm Liberty Lane Partners LLC -- alters the typical structure of SPACs normally underwritten in the U.S.

Lighter Exposure

Ordinarily, SPAC offerings require management to invest their own money at a rate between 2% to 4% of the entire deal's value -- which they risk losing if they don't complete the deal by deadline -- and reward management with as much as 20% of the company's stock if the deal is consummated. In addition, units sold in the IPO usually contain one share of common stock and one warrant; the stock and warrant can be traded separately after the IPO is completed.

In Goldman's structuring of Liberty Lane, management is putting a smaller stake of its own money at risk -- $3.5 million, or 1% -- and will receive a much smaller share of the company -- 7.5% -- than is the norm.

In addition, the IPO units will contain one share of common stock and a half a warrant each. Both the smaller stake that Liberty Lane management will receive, if successful, and the lower share-to-warrant ratio makes the SPAC less dilutive to public shareholders than the typical structure.

Goldman itself is taking a smaller underwriting fee of 6%, below the standard of 7% for most SPACs.

Continue reading at WSJ.com

Next article » Angel Investor: Life After Dealmaking

Previous article « E.On’s Just Desserts