Rice-A-$RONI

“Better a diamond with a flaw than a pebble without.” – Confucius

The epic bull market that erupted out of the globally coordinated monetary and fiscal responses to the Covid-19 lockdowns spawned a number of historic bubbles. From insolvent rental car companies to worthless crypto tokens, manias broke out across virtually every investment class, with the notable exception of value stocks. At the apex of the market froth, promoters used special purpose acquisition companies (SPACs) to bring all manner of pump-and-dumps, frauds, and otherwise not-ready-for-prime-time private companies to the public markets. Exploiting easy access to excess capital and loose rules on forward-looking projections, SPAC insiders cashed out at the expense of retail investors to the tune of tens of billions of dollars.

And then Gary Gensler ruined the party. In December of 2021, the chair of the Securities and Exchange Commission (SEC) signaled his displeasure with the situation and vowed to clean things up. His warning shot to investment bankers working such deals had a particularly chilling effect on the market (emphasis added throughout):

“Gary Gensler, the country's top securities regulator, said he's aiming to announce tougher rules for SPACs by early next year, as he warned about the potential dangers of the hot investment craze sweeping through Wall Street….

Gensler said the tougher rules would aim to enhance investor protections by focusing on the disclosures made by SPACs, by examining how the companies market themselves, and by ensuring banks hired by SPACs are ‘digging deeper’ and providing the appropriate level of scrutiny.”

Gensler followed up on March 30, 2022, with a crippling set of new rules for companies coming to market via SPAC, including limits on what promoters can and cannot say to the public during the process, how warrants and insider equity grants need to be accounted for, and a smorgasbord of other thorny regulations that ultimately made SPAC transactions more painful and less lucrative for all involved. The air left the SPAC balloon rather quickly thereafter. The De-SPAC Index, a rules-based index that captures the performance of a group of 25 public-by-SPAC companies, is down an incredible 85% from its all-time high.

Imagine our surprise, then, when the Rice family – one of the most respected and successful names in the energy sector – announced it was acquiring significant interest in a potentially breakthrough natural gas power plant technology via a SPAC transaction! Here are the opening paragraphs from last month’s press release describing the deal:

“Rice Acquisition Corp. II (NYSE: RONI) (“RAC II”), a special purpose acquisition company focused on supply-side decarbonization solutions, and NET Power, LLC (“NET Power”) today announced a definitive agreement to enter into a business combination (the “transaction”) to accelerate deployment of NET Power’s proprietary technology that delivers clean, reliable, and low-cost power from natural gas. After the business combination, the company will be named NET Power Inc. (the “combined Company”). The transaction is expected to close in the second quarter of 2023 and the combined Company will be listed on the NYSE under the ticker symbol “NPWR.”

Upon closing of the transaction, Ron DeGregorio, current CEO of NET Power and 40-year power and energy veteran who successfully led NET Power through technology validation and establishment of key supplier partnerships, will be succeeded by Danny Rice, current director of RAC II and former CEO of Rice Energy, Inc., to lead NET Power through commercialization and beyond.”

After receiving a noticeable number of inbound subscriber requests for our opinion on both the NET Power technology and the prospects seeded by this merger, we reached out to a contact in the Rice family office who agreed to make Danny Rice and two of his key advisers available for an in-depth interview. We were pleased to add a primary interview to our research and readily accepted.

Will the NET Power technology revolutionize the power industry, and what milestones should readers look for as signposts for success? Let’s dig in.