If a "promising startup" uses SPAC money to go from series B to public, that would be a good proposition for the public. Something like 23 and Me after seed round F has already been picked clean even before they enter the public markets!
A Sober Look at SPACs (2020)
71–80 of 119 posts
Re: A Sober Look at SPACs (2020)
#72I know its high risk... but some of those space oriented SPACs are just so tantalizing, anything to get closer to investing in SpaceX...
If you want to invest in SpaceX, Fidelity has some funds that are basically S&P500+SpaceX. SpaceX is a small percent of the funds (like 0.5%), but if you were gonna invest in Apple/Facebook/Amazon/Visa anyways that's not the end of the world
Re: A Sober Look at SPACs (2020)
#73I 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…
While I won't comment on your other points, I do want to correct you that many SPAC acquisition deals involve a lengthy investor presentation deck that shows historical/projected financials (which are then republished in a more typical/formatted SEC document closer to the proxy vote date of the merger).
Here's 23&Me from the SEC website: https://www.sec.gov/Archives/edgar/data/1804591/000095010321...
See page 34 for summary of financials.
Re: A Sober Look at SPACs (2020)
#74I 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…
>walling off much of the initial growth of the share price
Almost as if by design
Re: A Sober Look at SPACs (2020)
#75Just 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.
Agreed on the shadiness. I think the GME pump wasn't a direct attempt by him to make money (since he donated proceeds), it was mostly a strategy to get publicity and align him with the retail investor crowd on social media so that his next SPAC gets pumped. He was able to pump his CLOV position 10% today for example, using a single Tweet.
Re: A Sober Look at SPACs (2020)
#76Earlier quoted context omitted.
One such example: https://www.fool.com/investing/2021/01/28/yes-a-stock-can-ha... > As an example, take a situation involving four investors. Annie owns shares of GameStop, and Annie and her broker have an agreement that allows the broker to lend Annie's shares to short-sellers. It lends them to Bob, who subsequently sells those borrowed shares short in hopes that GameStop's share price will fall. > An investor named…
Okay, but this still seems like a perversion of market mechanics that should be regulated/banned.
Sort of like fractional reserve banking?
In practice it doesn't make a big difference whether it's banned or not. Stocks almost never have a short-interest above 100%, and the larger the short-interest the less attractive it becomes to join in so there's already negative feedback built in.
Re: A Sober Look at SPACs (2020)
#77I invest in SPACs regularly and have made a killing off investing in them. Plain and simple, SPACs are all about hype in terms of how much hype the target company can garner. I only buy pre-LOI SPACs and then consider selling them on the merger announcement or right before the merger completes. This strategy works because of social media. People go around social media to hype up the company so to a certain extent it…
I don't know how not to make this a personal judgment, but I hate this shit with a passion.
Edit: For the sake of clarity, what I hate is the amount in which influencers and social media impact the market.
Re: A Sober Look at SPACs (2020)
#78Whenever 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…
>An impartial cost-benefit analysis needs to be done which is sadly impossible for someone whose funding comes from the deep pockets of Wall Street and institutional investors. The link is to an academic paper that literally performs an impartial cost-benefit analysis of SPACs based on publicly available information, and concludes that the way SPACs are currently structured are a pretty crap deal apart from those who…
I'm pretty sure "anti-wall street" is just the financial version of "doctors hate him", i.e. clickbait. Last week it was buying into the GME bubble that was marketed as "anti-wall street" and look how that turned out.
Re: A Sober Look at SPACs (2020)
#79Whenever 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…
The fees and dilution companies take on when doing a SPAC are typically higher than if they had done an IPO. SPACs also can and often do pop up just like IPOs.
When you go with a SPAC you are basically paying more fees in exchange for a faster route to go public and more price certainty. In most cases high flying companies with great numbers are better off doing a direct listing or IPO than a SPAC.
Re: A Sober Look at SPACs (2020)
#80Marketplace did an deep dive into SPACs a few days ago: https://www.marketplace.org/shows/make-me-smart-with-kai-and...
Seems like pure regulatory arbitrage to this guy.
Edit: Bonus, it's also a pump and dump scheme!