U.S. Markets closed

Empower CEO Matt Rubel on SPAC landscape, consumer trends

Empower CEO & Executive Chairman, Matt Rubel, joins Yahoo Finance’s Alexis Christoforous and Brian Sozzi to discuss the company’s recent SPAC deal.

Video Transcript

BRIAN SOZZI: Joining us now is Empower CEO and Executive Chairman Matt Rubel. Matt, good to see you here. So you're a-- very much a veteran of the retail space. You are atop collective brands, certainly a company we all know very well. What is your goal with the SPAC?

MATT RUBEL: Well our goal is a little bit different than just going out and raising money. We studied this space for quite a while, you know, before we decided to do it and as an operating executive before I really wanted to get involved in something like this. And what we see is, especially because of COVID, that a tremendous amount of companies, you know, are in need of capital. But at the same time, capital doesn't answer the whole thing. It's really in the need of capital and know-how.

And so what we've done is we've pulled together kind of the sophisticated aspect of a private equity firm, which is MidOcean and the best middle-market private equity firm out there, in conjunction with a group of outstanding, you know, transformative leaders in the consumer sector across the board. Their know-how in conjunction with this money will take these companies that have been locked up during this past six- to 12-month time period and enable them to get capital and a path toward growth tomorrow.

ALEXIS CHRISTOFOROUS: Matt, why is the SPAC the right way to go in this instance and not a traditional IPO or even a direct listing, which we know those have actually become very popular too with some companies?

MATT RUBEL: Well, you know, it's a great question, Alexis. And it was actually a question I had before I wanted to get involved in doing this. And what I believe I've learned in that journey is that when you actually raise the money for a SPAC and if you populate your board and your advisors well, which we believe we have done, we're able to then work with the CEOs, work with the management team to say here's what it is to enable you to operate effectively in the public space. What are the unit economics? What is your marketplace? How you can create consistent growth metrics that will drive these things along in a thoughtful way?

From an investor standpoint, it's actually quite a spectacular vehicle because those people who are engaged in the de-SPACing, where it actually will go under the covers with us, look at the company, look at the unit economics, look at those things that we study, and then they will invest, not just transact to be day traders. But they will invest in that company so that they can help ease it into the public marketplace.

And then there's one other thing that comes along with a SPAC, and that is that the SPAC-- you will actually generate pro forma prospective performance. And you're able to share that performance with the public marketplace and with, you know, the people who will be covering your companies. So I believe-- in the end I came to the conclusion that it actually was a better way to ease a company into the public marketplace with solid investors and then to democratize and enable growth to be available to the retail investor as well as to the institutional investor.

BRIAN SOZZI: Matt, I wasn't letting you leave here without discussing the state of retail. I can't think of a better person to be discussing the state of retail. A lot of companies have gone completely under this year. It's shaping up to be a real chaotic holiday shopping season. What's your read on it?

MATT RUBEL: There's going to be a [? rat ?] through the [? boa ?] here, you know, come, you know, that November, December time period, hence why people are trying to pull things forward with these October promotions to drive things through. The infrastructure, the direct-to-consumer infrastructure is going to be stressed in a way that you have never seen before. People won't be getting enough trucks. The amount of-- you know, people are moving their ship, you know, if you want to get by Christmas dates up, you know, to December 12th, December 11th, and things like that.

It will be a very vibrant Christmas, especially if any stimulus comes through at the same time. So I'm not worried about total demand, but there will be winners and losers to your point. And there will be people who just are not relevant anymore. They're not communicating with the consumer effectively anymore, and they're not set up to have that direct-to-consumer via the digital engagement, whether it's, you know, order online, pick up in store, or whether it's just have it shipped to your home. But it's going to be vibrant.

ALEXIS CHRISTOFOROUS: Well certainly Amazon hopes it will be. It looks like we're going to get a little Christmas in October because Amazon's Prime Day is this week, and at least one analyst at eMarketer saying that he expects sales to generate nearly $10 billion from Prime Day. Do think that that's possible, or does that seem sort of pie in the sky?

MATT RUBEL: Well I don't-- I don't look at their numbers so that I would be able to articulate whether they're going to hit $10 billion or $8 billion or $12 billion. I wouldn't know that. But I can tell you, I chair a kid's company, KidKraft, which is, you know, the leader-- leading provider of imaginative play-- you know, dollhouses, you know, desks, things like that, outdoor play sets. And our business has been spectacular with Amazon and spectacular without Amazon as well. So we're 75% direct-to-consumer, and during COVID our business has been up double digit almost every week.

BRIAN SOZZI: I have 30 seconds left. Are you nearing an acquisition for the SPAC yet?

MATT RUBEL: Well we just opened shop. You know, in a SPAC you can't go shopping until you actually have the money raised. So we raised the money with JPMorgan and Jefferies on Friday. But I'm happy to say that we already have a lot of inbounds and outbounds, and we'll be having quite a few meetings already this week. So we are seeing the need, and we're seeing our model, which is kind of the new model where it's investors with operating people, come forward in a specific way, and not that many are in the consumer space. So we're seeing some good nibbles.