Imagine if Elon made a SPAC. I'd invest every penny I had.
A Sober Look at SPACs (2020)
101–110 of 119 posts
Re: A Sober Look at SPACs (2020)
#102Earlier quoted context omitted.
I'd love to see where this has been explained. I've not seen this anywhere.
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…
I get how this works but it still doesn't make sense on why i should be able to lend shares that i don't own. The whole idea of shorts in general is kind of messed up. I get shorting is a form of 'Fraud detection', or 'Market stabilization' but betting on a company's failure seems.... not-right.
Re: A Sober Look at SPACs (2020)
#103Earlier quoted context omitted.
>As a rule of thumb, the more convoluted things get in finance, the more nefarious the intentions Many years ago, the quote I heard went something like, "There are only 3 real asset classes: Equities, Fixed Income, and instruments designed to make money for Wall Street. Colloquially known as Stocks, Bonds, and Bullshit."
what’s the difference between equities and stocks?
Equity is an asset class. It includes stocks for sure, but holdings in index funds, ETFs, private equity investments, venture capital are also examples of equities.
Re: A Sober Look at SPACs (2020)
#104Earlier quoted context omitted.
Dumb question: how do you decide which SPACs to buy if it's before the LOI and you can't figure out what company they will be hyping?
You look at the management team and see if they have potential. For example, a SPAC with a "google executive" would be more desirable over some no-name person. Same for the type of companies they're targeting. An industry like electric vehicle would be superior over a spac targeting ed tech for example.
Are you all in on PSTH?
Re: A Sober Look at SPACs (2020)
#105[deleted]
Re: A Sober Look at SPACs (2020)
#106I know its high risk... but some of those space oriented SPACs are just so tantalizing, anything to get closer to investing in SpaceX...
None of those space companies are doing anything like SpaceX. You might as well just buy $GOOGL which had a 5-10% stake (probably some dilution now) in SpaceX. Although that value is probably only 1% of $GOOGL so you better hope SpaceX 100x’s for a 2x $GOOGL gain.
Re: A Sober Look at SPACs (2020)
#107Earlier 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…
I get how this works but it still doesn't make sense on why i should be able to lend shares that i don't own. The whole idea of shorts in general is kind of messed up. I get shorting is a form of 'Fraud detection', or 'Market stabilization' but betting on a company's failure seems.... not-right.
You don’t only make money if the company fails, but if the market thinks it’s going to succeed at a faster pace than it eventually does. You’re not betting against the company, but the market’s opinion of the company. The alternative to allowing shorting is to only allow stocks to increase in price which is obviously silly.
Re: A Sober Look at SPACs (2020)
#108Earlier quoted context omitted.
Putting analogies aside, what I'm saying is that regulating this would be extremely costly to industry and for extremely little (or no) benefit. Stocks with a short interest over 100% almost never happen, and in the rare case that it does, nobody has provided a sound rationale about why this is a bad thing and not even a good thing. If you think you have a rationale as to why it's a bad thing, please present it. I te…
i like your optimism, but here is the thing: shorting is not valuable to society. if a company sucks their stock will go down. if it’s a good company their stock will go up. shorting just puts artificial pressure on the price. it’s a practice that i believe has no place in the market. the same way that HF trading is just a big scam dressed up nicely. we need things that bring value, not scams
Chesterton's Fence applies.
(1) Shorting is necessary for the operation of the derivatives market due to the need to hedge Greeks.
(2) Shorting is necessary for market makers to provide quotes on both sides, which is why spreads are so tight.
(3) Shorting is a natural part of any market for a fungible product. We can't short houses (this was Elon's flawed example) because they're not fungible. We can short commodities that are fungible (which includes stock) because it's possible to create a contract where repurchase and return of said commodity by the borrower makes the lender whole. Banning shorting is an authoritarian move which says "an owner of a commodity (gold, silver, stock) is disallowed from arranging a voluntary contract to lend it to someone for a fee".
(4) Shorting is to the benefit of longs that lend stock due to borrow fees, which benefits the lender in excess of the adverse market impact.
(5) Shorting is opt-out. The float owner can prevent their float from being shorted.
(6) Shorting is fundamentally healthy for the capital markets. NKLA was only revealed as a fraud because of an incentive created to find downside possibilities in stocks. If you remove that downside incentive, you get more bubbles because everyone is incented towards hype and promotion.
Re: A Sober Look at SPACs (2020)
#109Earlier quoted context omitted.
> Except it just happened? So what? If there's that much interest in shorting a stock, and it can be done, why not allow it?
fair enough. but if people want to buy the stock at 350$ why disallow it? we either run with the rules or not. you don’t change the rules when the game no longer worked as you want it to work
RH purportedly didn't change the rules, it was unexpectedly large NSCC capital requirements due to an unexpectedly large level of volume on the week.
Re: A Sober Look at SPACs (2020)
#110Whenever 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…
> Whenever you have some instrument attacking Wall Street [...] 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 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 institutional investors) amid other things.
SPACs have hefty investment banking fees, and, frequently, their own enormous pop. In the case of Nikola, the SPAC sold shares for $10 that traded up to $34 on the first day of trading, a 240% pop, and many other recent SPACs have had large pops. Every effort I've seen to evaluate the costs of SPACs has found them to be at least as expensive as IPOs. How could they not be? SPACs have to do their own IPO just to get started (with hefty fees), then they conduct a merger (with hefty fees), then there may be the sponsor promote, then there's the widely documented fact that most of the cash raised is returned to investors via redeptions, etc.
> 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
You literally wrote that in a comment on a paper doing an impartial cost-benefit analysis which was not funded by Wall Street.
Whatever advantages SPACs have, or may have in the future, the ones happening today are very expensive.