Could giant SPACs be next?
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Could giant SPACs be next?
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Re: Could giant SPACs be next?
#2How do you pronounce SPAC?
Re: Could giant SPACs be next?
#3How do you pronounce SPAC?
Exactly how it looks - “Spack”
Re: Could giant SPACs be next?
#4I'm pretty bearish on SPACs tbh. Not in the immediate future but 2-3 years out (most of 2021 will be spent on vaccines so I'm sure there will be more stimulus added to the economy).
It's just bonkers that there's so many companies that you can take public with this mechanism without more than a handful being duds so it just seems like market participants who are able to launch SPACs are doing so to take advantage of the mkt conditions to cash out. Also, there are no incentives to keep the SPAC promoters as long term shareholders so they really don't have any reason to not dump their shares after a little bit of time unless they see that these companies will have sustained growth. So to me (with a few exceptions) this seems like a massive pump and dump scheme but with more sophisticated players.
I had initially assumed that there was only a little bit of extra cash floating around in the US on the account of the two stimulus bills passed but I recently read in an article on Bloomberg that the US Govt/Fed bought something in the neighbourhood of $5 TRILLION worth of corporate bonds in 2020 alone to keep the mkts from freezing, etc. And that number that really seemed absolutely unreal to me. Out of that, a lot of it went to companies (esp. those controlled by Private Equity) to pay dividends to their owners. Lots of share repurchases as well I'm sure. So lots of cash floating around with investors for SPACs to keep chugging along till the US keeps adding more money to the mkts.
Re: Could giant SPACs be next?
#5What's driving the recent popularity explosion of SPACs? They've been around since at least the early 2000s, but total capital participating has risen nearly tenfold since 2014.
Re: Could giant SPACs be next?
#6What's driving the recent popularity explosion of SPACs? They've been around since at least the early 2000s, but total capital participating has risen nearly tenfold since 2014.
Speculative opinion - lack of regulations are increasingly appealing in an ever frothier market.
Re: Could giant SPACs be next?
#7What's driving the recent popularity explosion of SPACs? They've been around since at least the early 2000s, but total capital participating has risen nearly tenfold since 2014.
basically they became much more accessible to regular people, and thus much more exposed to the pump+dump cycle and hucksters. I'm not saying SPACs are bad, but I think that is what is driving the recent craze. The number of wildly speculative and clear astroturf threads on reddit about PSTH or CCIV and others is crazy.
Re: Could giant SPACs be next?
#8Re: Could giant SPACs be next?
#9What's driving the recent popularity explosion of SPACs? They've been around since at least the early 2000s, but total capital participating has risen nearly tenfold since 2014.
From the company's side, there is a willingness to explore non-traditional methods of going public (see also: direct listings, or not going public at all). I would say this has been driven directly by a perception that companies leave money on the table in traditional IPOs, and indirectly by the rise of the "disruptor" mindset led by tech companies where CEOs are more willing to challenge the status quo.
From the investors' side, SPACs are popular because they've been really successful! I don't have stats on this but just buying SPACs surely outperformed any index in the last 5 years. You'd expect this effect to disappear as they get more popular, but it's worth noting that blindly buying IPOs has also been a really good investment strategy - enough first-day pops of 50% or 100% to outweigh the duds - though less accessible to small investors.
Re: Could giant SPACs be next?
#10Could someone ELI 15?