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With $600M 'Blank Check' IPO, VCs Experiment on Startup Listings

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Re: With $600M 'Blank Check' IPO, VCs Experiment on Startup Listings

#31

Post by indescions_2017 »

chollida1 wrote: post #9

So SPACs or blank cheque companies aren't new. They've been around for many years. http://www.investopedia.com/terms/s/spac.asp Essentially people collect money upfront and then go deal hunting, after a period of time, usually 2years or less, they then go back to the people who put their money in the deal and give them the choice of pulling their money out and taking a nominal interest rate gain, or putting their mon…

Off topic completely, but is there a long bull case for energy? Are we seeing a bottom in oil and natgas prices or will secular changes and renewable consumption dominate? And are infrastructure funds such as $ALPS, $ENFR a good way to get exposure and long term income distributions? Thanks in advance!

As far as Chamath's Hedosophia, not sure I'd bet against him just yet. He's got a pretty good track record of winning ;)

Re: With $600M 'Blank Check' IPO, VCs Experiment on Startup Listings

#32

Post by dkhenry »

Here is what I don't get. If a company can IPO just for the sake of having a publicly tradable security, what is the big overhead for a large company. I am really starting to believe the only reason companies aren't IPO'ing isn't because its hard or expensive, but because they are getting stupid good deals from private investors to burn through cash.

Re: With $600M 'Blank Check' IPO, VCs Experiment on Startup Listings

#33

Post by danielahn »

probe wrote: post #13
danielahn wrote: post #12

For asset managers, the reason you form a SPAC is because you will get upside in the form of convertible warrants that will net you ~20% ownership, essentially for free (cost of your time to find and close a deal, and minimal upfront cost), assuming the stock price outperforms the original issue price. You should ask yourself why an existing owner who believes in the future of their company would be willing to give u…

Or a company is raising a normal round of funding and this is suddenly a much better option - 1) funding, 2) liquidity in public markets, 3) backing of SC and whatever help they may offer. If I was raising 600M anyways, these added benefits seem like a good deal to me.

Why not just ask Social Capital to invest out of their VC fund? The only difference is liquidity in public markets, and if that's all you want, why are you giving up 20% of the upside from your current valuation when it would cost you less than 1% of your current to IPO yourself?

Re: With $600M 'Blank Check' IPO, VCs Experiment on Startup Listings

#34

Post by hendzen »

indescions_2017 wrote: post #31
chollida1 wrote: post #9

So SPACs or blank cheque companies aren't new. They've been around for many years. http://www.investopedia.com/terms/s/spac.asp Essentially people collect money upfront and then go deal hunting, after a period of time, usually 2years or less, they then go back to the people who put their money in the deal and give them the choice of pulling their money out and taking a nominal interest rate gain, or putting their mon…

Off topic completely, but is there a long bull case for energy? Are we seeing a bottom in oil and natgas prices or will secular changes and renewable consumption dominate? And are infrastructure funds such as $ALPS, $ENFR a good way to get exposure and long term income distributions? Thanks in advance! As far as Chamath's Hedosophia, not sure I'd bet against him just yet. He's got a pretty good track record of winnin…

Everyone looks like a genius in a bull market.

Re: With $600M 'Blank Check' IPO, VCs Experiment on Startup Listings

#35

Post by pfarnsworth »

indescions_2017 wrote: post #31
chollida1 wrote: post #9

So SPACs or blank cheque companies aren't new. They've been around for many years. http://www.investopedia.com/terms/s/spac.asp Essentially people collect money upfront and then go deal hunting, after a period of time, usually 2years or less, they then go back to the people who put their money in the deal and give them the choice of pulling their money out and taking a nominal interest rate gain, or putting their mon…

Off topic completely, but is there a long bull case for energy? Are we seeing a bottom in oil and natgas prices or will secular changes and renewable consumption dominate? And are infrastructure funds such as $ALPS, $ENFR a good way to get exposure and long term income distributions? Thanks in advance! As far as Chamath's Hedosophia, not sure I'd bet against him just yet. He's got a pretty good track record of winnin…

Oil prices are low because Saudia Arabia and the US want ISIS to be squeezed in terms of funding, and it's working. That's the only reason why prices are so manipulated. Expect prices to rise back to $100 once ISIS is gone.

Re: With $600M 'Blank Check' IPO, VCs Experiment on Startup Listings

#36

Post by abakker »

chollida1 wrote: post #9

So SPACs or blank cheque companies aren't new. They've been around for many years. http://www.investopedia.com/terms/s/spac.asp Essentially people collect money upfront and then go deal hunting, after a period of time, usually 2years or less, they then go back to the people who put their money in the deal and give them the choice of pulling their money out and taking a nominal interest rate gain, or putting their mon…

A side note - I work for a company that is/was a SPAC several years ago. There is a ore case which could benefit SV/startup types of firms: the ability to make multiple small acquisitions and very rapidly create a larger business. In the case of the company where I work, several smaller consultancies were bought and gave us better ability to deliver a broad array of services to our clients. In SV tech companies, especially small ones that deliver more feature/function type tech rather than fully fledged businesses, this could allow them to merge and cooperate. If the founder of the SPAC buys the right businesses, this could be substantially better than the standard IPO or acquihire.

Re: With $600M 'Blank Check' IPO, VCs Experiment on Startup Listings

#37

Post by abakker »

pgwhalen wrote: post #22
stevenj wrote: post #7

Earlier quoted context omitted.

As a side note Matt Levine's column is my favorite thing to read each day. It's often funny and quite informative.

Agreed. He may not be a software engineer or IT professional like many of us are on Hacker News, but he is a true hacker in the way he explores ideas and thinks about the world. It's a pleasure to read him every day.

Truly one of the greatest writers in journalism today, too. Excellent wordplay. One from last week with the pun about ether killed me. https://www.bloomberg.com/view/articles/2017-09-06/the-fall-... "but here I want to stress what an old and dull idea this is. "People should be able to sell equity in themselves" is a perennial Finance 101 dorm-room musing -- as I've mentioned before, I wrote a paper about it in law school -- that has been tried repeatedly and never really gone anywhere, because (1) no one wants to sell equity in themselves and (2) no one wants to buy it. The obstacles are not technological but human, but people are going to keep trying to solve them with new technologies until human nature finally changes. You won't sell equity in yourself for dollars, but for ether, sure, knock yourself out. Cryptocurrency will give every dubious financial idea a second act: It didn't work before, but what if we tokenized it?"

Re: With $600M 'Blank Check' IPO, VCs Experiment on Startup Listings

#38

Post by icebraining »

mrleiter wrote: post #2

I recently stumbled upon a "project" called Own Austria, which promises you to own a part of Austria's products. Essentially you buy partial ownership of a fund that only invests in Austrian companies. The selection criteria? A)They must be Austrian and b)"be important in regards to jobs and revenue". There is no clear investment strategy. I chuckled and moved on. This somehow looks a bit the same, although the peopl…

Is that essentially different from buying in to the S&P 500?

Re: With $600M 'Blank Check' IPO, VCs Experiment on Startup Listings

#39

Post by beambot »

abakker wrote: post #37
pgwhalen wrote: post #22

Earlier quoted context omitted.

Agreed. He may not be a software engineer or IT professional like many of us are on Hacker News, but he is a true hacker in the way he explores ideas and thinks about the world. It's a pleasure to read him every day.

Truly one of the greatest writers in journalism today, too. Excellent wordplay. One from last week with the pun about ether killed me. https://www.bloomberg.com/view/articles/2017-09-06/the-fall-... "but here I want to stress what an old and dull idea this is. "People should be able to sell equity in themselves" is a perennial Finance 101 dorm-room musing -- as I've mentioned before, I wrote a paper about it in law s…

Then again... Many great, new ideas are slight variations on old tropes. To quote pg's latest essay:

It's not true that there's nothing new under the sun. There are some domains where there's almost nothing new. But there's a big difference between nothing and almost nothing, when it's multiplied by the area under the sun.

http://paulgraham.com/sun.html

Re: With $600M 'Blank Check' IPO, VCs Experiment on Startup Listings

#40

Post by martinshen »

For startups... the biggest disadvantage to a SPAC is fee structure. The biggest advantage for a SPAC is timing. In tech startup-landia I believe timing greatly outweighs ~13% fee difference.

Many startups start the IPO process which takes 6-12 months from start to finish only to find that their IPO will be delayed due to unfavorable market timing. In tech IPOs, this can mean upwards of 20% pricing differences.

I'm surprised at how well this SPAC is trading at given how generally unsuccessful SPACs have been historically.

I believe there's a lot of opportunity in SPAC's little brother, the RTO on TSX-V, for startups. There are plenty of good startups that are no longer in a venture-fundable state (going after markets of sub $500M with less than 20% YoY growth) where liquidity and investment could help all stakeholders. If you know companies that fit this profile: $3M-$10M revenue, breakeven and 7-25% YoY growth... let me know.

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