Mega Spac mints $29 billion fortune that collapses in minutes

MSP, based in Florida, obtains reimbursements for payments wrongly made by Medicare and other healthcare groups. PHOTO: MSP RECOVERY/FACEBOOK

NEW YORK (BLOOMBERG) - If the Spac craze is over, it's going out with a bang by making a Miami lawyer who has owned speedboats named Class Action and Power Of Attorney one of the richest people in the United States - if only briefly.

MSP Recovery was valued at US$32.6 billion (S$44.7 billion) in its merger with special purpose acquisition company (Spac) Lionheart Acquisition Corp II, the largest such combination ever in the US as measured by enterprise value. It began trading on Tuesday on the Nasdaq, plunging more than 60 per cent to US$3.85 at 10.04am in New York, less than an hour after its debut.

Mr John Ruiz, 55, owns a 65 per cent stake in the company. That position was worth US$21.4 billion (S$29.4 billion) at the US$10 merger price, but plunged to US$8.3 billion after MSP began trading.

With the Spac boom veering towards a bust as risk appetite wanes, the merger could end up being one of the last outrageous deals to reach the market. It stands out for its transactions between stakeholders, huge fees and lack of capital raised.

Mr Ruiz, in an interview on Tuesday, said the drop in MSP's share price was a result of poor market conditions and was not specific to the company he founded in 2014.

MSP, based in Coral Gables, Florida, obtains reimbursements for payments wrongly made by Medicare and other healthcare groups. It combs records and identifies potentially erroneous payments using data analysis. It owns a portfolio of claims with a billed amount of US$1.5 trillion, though it says revenue from the business has not yet been substantial.

Billionaire lifestyle

That hasn't stopped Mr Ruiz, a son of Cuban immigrants, from living a billionaire lifestyle for some time.

He purchased a Boeing 767 previously owned by Qantas Airlines to use as his private jet, the Miami New Times reported in April. The plane once would have flown about 300 people.

After a six-month refit costing almost US$10 million, it sports a theatre, two lounges, a master bedroom with a full bathroom and shower, and space for about 30 guests. The plane is registered to MSP Recovery Aviation, a company controlled by Mr Ruiz that MSP pays for transportation services.

Mr Ruiz and Mr Frank Quesada, the company's chief legal officer who has a stake in the post-combination company that is now worth about US$3.5 billion, separately own a law firm that will be the exclusive lead counsel for MSP. That positions them to receive 20 per cent of all recovered payments.

Meanwhile, it is the second post-merger Spac deal for Lionheart chief executive Ophir Sternberg, after taking fast-food chain BurgerFi International public in December 2020. Those shares traded at about US$3 on Tuesday, down 81 per cent since its merger. BurgerFi's founder sued Mr Sternberg earlier this year relating to an investment he said he made in the sponsor of Lionheart. The lawsuit was later withdrawn.

Mr Sternberg has a history with Mr Ruiz. They bought luxury powerboat manufacturer Cigarette Racing Team together last year. Also in 2021, Mr Ruiz got a US$20 million loan from Mr Sternberg to buy a condo he was developing. He will pay it back in shares of MSP.

"Any time we see these kinds of relationships, in particular financial relationships, between parties who are meant to be negotiating a transaction at arm's length, it raises a red flag as to whether it's a good deal," said professor of corporate finance Usha Rodrigues at the University of Georgia's law school, who has written about Spacs.

Mr Ruiz said such issues were "red herrings" and do not matter if they are properly disclosed.

"People have multiple business transactions among themselves - that's the way America works," he said.

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