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A Sober Look at SPACs (2020)

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Re: A Sober Look at SPACs (2020)

#41

Post by neximo64 »

vtantia wrote: post #31

Whenever you have some instrument attacking Wall Street (in this case, the IPO itself), papers come out trying to protect them. This does not mention drawbacks of the IPO the SPAC is getting rid of - the 6-7% investment banking fee, the hassle of doing several roadshows, the near 100% IPO pop due to which the company raises half of what it would have (amounting to a 50% fee so to say which goes into the pockets of in…

As opposed to the 20% tax free, dilutive!! fee that goes to the SPAC sponsor for a finders fee

Re: A Sober Look at SPACs (2020)

#42

Post by _ea1k »

nostrademons wrote: post #34
_ea1k wrote: post #28

Earlier quoted context omitted.

> One of the worst aspects of a SPAC is that it's essentially a grab-bag purchase since even once you know the company being bought, you still don't initially know whether it's a good investment. Yeah, and you also don't really know if it will go through. What happens when a SPAC claims to be merging with the company but the deal never materializes? It feels like a weird system of gambling instead of investing in tha…

SPACs usually have a clause in them that the money is refunded to the shareholders if it fails to complete an acquisition by a certain target date. The expenses of running the fund come out of the initial investment put up by the SPAC's sponsors, i.e. the folks who create the SPAC make the public investors whole and eat the losses themselves. This is why there's a de facto floor of $10 on pre-merger SPAC stock prices…

Oh, I hadn't realized that. I think the cases that I was thinking of were just rumors of future SPACs before an official confirmation: https://investorplace.com/2021/02/cciv-stock-no-imminent-luc...

It seems like this leaves a lot of room for bad behavior by insiders.

Re: A Sober Look at SPACs (2020)

#43

Post by dhnajsjdnd »

vtantia wrote: post #31

Whenever you have some instrument attacking Wall Street (in this case, the IPO itself), papers come out trying to protect them. This does not mention drawbacks of the IPO the SPAC is getting rid of - the 6-7% investment banking fee, the hassle of doing several roadshows, the near 100% IPO pop due to which the company raises half of what it would have (amounting to a 50% fee so to say which goes into the pockets of in…

Wall Street underwriters are making tons of money on SPACs: https://www.wsj.com/articles/spacs-rescued-wall-street-from-...

Re: A Sober Look at SPACs (2020)

#44

Post by rorykoehler »

boh wrote: post #26
goat_whisperer wrote: post #14

I didn't know a great deal about SPACs, but it looks like the real winners are the initial Sponsors and IPO investors, while the losers are the suckers who pay shares after the SPAC merges with the target company. Let's examine how convoluted the SPAC process is. First, a SPAC raises money through an IPO that it will use to merge with a target company. Then, when the SPAC finds a target and proposes a merger, many of…

One of the worst aspects of a SPAC is that it's essentially a grab-bag purchase since even once you know the company being bought, you still don't initially know whether it's a good investment. This is true even if you're somewhat familiar with the business. 23andMe for instance, is currently SPACing, and though you might've heard about the company before, it's still unclear how profitable it really is or how much gr…

I don’t know anyone who thought wework was on good financial footing.

Re: A Sober Look at SPACs (2020)

#45

Post by rorykoehler »

woah wrote: post #10
cj wrote: post #3

Just one example of why SPACs need to be looked at from a regulatory perspective: https://www.cnbc.com/2021/02/05/chamath-palihapitiya-backed-... In short, Clover Health is going public via a SPAC, but never disclosed it was under investigation by the DOJ. > Clover said it decided it did not need to disclose the DOJ inquiries after consultation with its lawyers. The company did not say what the DOJ’s inquiries were a…

Chamath first came to my attention last week when he introduced his run for California governor by promising to give everyone free money and cut taxes to zero. He then bought into GameStop stock, pumped it, and sold at the top while many gullible fools lost their life savings. What a shady dude.

I invested in one of Chamath’s SPAC plays (not because of Chamath). He is legit as far as I can tell. The company is solid, has an amazing hard tech product and everything has worked out great so far. I have no doubt that everything is honest and that the company will do amazingly well in the next decades. The founders have great track records. This is something like the 4th unicorn the CEO has created and gone public with or exited via buyout. I don’t think he would choose to partner with Chamath if the guy was shady.

Re: A Sober Look at SPACs (2020)

#46

Post by vmception »

neximo64 wrote: post #41
vtantia wrote: post #31

Whenever you have some instrument attacking Wall Street (in this case, the IPO itself), papers come out trying to protect them. This does not mention drawbacks of the IPO the SPAC is getting rid of - the 6-7% investment banking fee, the hassle of doing several roadshows, the near 100% IPO pop due to which the company raises half of what it would have (amounting to a 50% fee so to say which goes into the pockets of in…

As opposed to the 20% tax free, dilutive!! fee that goes to the SPAC sponsor for a finders fee

The market is telling you what you should be putting your time on and here you are in the comments section envisioning a fake controversy instead

Re: A Sober Look at SPACs (2020)

#47

Post by andylei »

vtantia wrote: post #36
supercanuck wrote: post #33

Earlier quoted context omitted.

> It is sad that critical reasoning is dead on HN What? > An impartial cost-benefit analysis needs to be done >I have not even begun >… Wall Street would assume It would seem irony is not dead.

Look at the comments below which mention 1 bullet point and do not look holistically at the problem and the solution. I have been finding this to be the case on a lot of HN comments recently I do not claim to be making an impartial analysis myself. Just putting out some points which have been omitted by the Wall Street-funded academic paper

> by the Wall Street-funded academic paper

citation needed

Re: A Sober Look at SPACs (2020)

#48

Post by cinntaile »

vtantia wrote: post #31

Whenever you have some instrument attacking Wall Street (in this case, the IPO itself), papers come out trying to protect them. This does not mention drawbacks of the IPO the SPAC is getting rid of - the 6-7% investment banking fee, the hassle of doing several roadshows, the near 100% IPO pop due to which the company raises half of what it would have (amounting to a 50% fee so to say which goes into the pockets of in…

If you have better or different sources explaining how SPACs work and what their effects are I am all ears.

Re: A Sober Look at SPACs (2020)

#49

Post by vmception »

rorykoehler wrote: post #44
boh wrote: post #26

Earlier quoted context omitted.

One of the worst aspects of a SPAC is that it's essentially a grab-bag purchase since even once you know the company being bought, you still don't initially know whether it's a good investment. This is true even if you're somewhat familiar with the business. 23andMe for instance, is currently SPACing, and though you might've heard about the company before, it's still unclear how profitable it really is or how much gr…

I don’t know anyone who thought wework was on good financial footing.

it wasn’t about good, it was about how bad

many and possibly most employees were living in a delusion though, that was pretty funny because when I polled them, many didn’t understand any of the financial meme lingo as wall street was making fun of wework for a whole year. So, they didnt get the jokes to even know it was a negative view.

Re: A Sober Look at SPACs (2020)

#50

Post by vtantia »

dhnajsjdnd wrote: post #43
vtantia wrote: post #31

Whenever you have some instrument attacking Wall Street (in this case, the IPO itself), papers come out trying to protect them. This does not mention drawbacks of the IPO the SPAC is getting rid of - the 6-7% investment banking fee, the hassle of doing several roadshows, the near 100% IPO pop due to which the company raises half of what it would have (amounting to a 50% fee so to say which goes into the pockets of in…

Wall Street underwriters are making tons of money on SPACs: https://www.wsj.com/articles/spacs-rescued-wall-street-from-...

That is a good point but this is temporary. SPAC lords will reduce these margins soon enough. It is in their direct incentive to do so. This is a speculative assertion by me (one that I'm quite confident about), but I'm not sure one can be certain about the future
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