The Great SPAC Scam: SPACs a Great Deal for Sponsors, but Not Others
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The Great SPAC Scam: SPACs a Great Deal for Sponsors, but Not Others
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Re: The Great SPAC Scam: SPACs a Great Deal for Sponsors, but Not Others
#2Right. You pay 20% of the company's value to avoid some legal fees and SEC scrutiny. And then there's an average net loss for investors.
Re: The Great SPAC Scam: SPACs a Great Deal for Sponsors, but Not Others
#3Right. You pay 20% of the company's value to avoid some legal fees and SEC scrutiny. And then there's an average net loss for investors.
What am I missing? Other than the sponsors, what are people getting out of it? Going "public" and selling shares on the public market without having to disclose anything first? This feels so bubble.
Re: The Great SPAC Scam: SPACs a Great Deal for Sponsors, but Not Others
#4For those investing in public equities: I personally believe some SPACs are definitely worth it in the long run. SPACs suffering on the public markets are a great opportunity to make long-term investments if you are very, very careful and wait a bit longer than most to jump into the right companies.
From my experience, the strategic part is to wait until warrants expire. Most SPACs have very, very positive investor presentations that assume they will 10x or 100x in value over the next 5-10 years... Typically, SPAC sponsors get warrants to buy additional shares of the companies at a significantly lower price than those buying on public markets post merger... Knowing nothing else, you'll want to wait until these warrants expire as that's when things should stabilize.
... at least that's my strategy. Curious what others are doing.
Re: The Great SPAC Scam: SPACs a Great Deal for Sponsors, but Not Others
#5Right. You pay 20% of the company's value to avoid some legal fees and SEC scrutiny. And then there's an average net loss for investors.
What am I missing? Other than the sponsors, what are people getting out of it? Going "public" and selling shares on the public market without having to disclose anything first? This feels so bubble.
Gives late stage VCs a way to dump their fail whales on the public market and cash out before they fail.
Re: The Great SPAC Scam: SPACs a Great Deal for Sponsors, but Not Others
#6For those investing in public equities: I personally believe some SPACs are definitely worth it in the long run. SPACs suffering on the public markets are a great opportunity to make long-term investments if you are very, very careful and wait a bit longer than most to jump into the right companies. From my experience, the strategic part is to wait until warrants expire. Most SPACs have very, very positive investor p…
Your warrant coverage thoughts are very on point, spacs if structured properly are very clever but the lack of transparency on warrants and notes is a problem for the asset class.
Re: The Great SPAC Scam: SPACs a Great Deal for Sponsors, but Not Others
#7For those investing in public equities: I personally believe some SPACs are definitely worth it in the long run. SPACs suffering on the public markets are a great opportunity to make long-term investments if you are very, very careful and wait a bit longer than most to jump into the right companies. From my experience, the strategic part is to wait until warrants expire. Most SPACs have very, very positive investor p…
Your warrant coverage thoughts are very on point, spacs if structured properly are very clever but the lack of transparency on warrants and notes is a problem for the asset class.
...and what's also interesting is how little innovation there is in SPACs. Tells you a lot about how stale/uninnovative the entire finance industry is.
Everyone has similar warrants, similar share structures, and even the $10-pre-merger price. AFAIK, there's no reason for all these consistencies beyond copying and pasting the original docs.
Anyway, I am tracking a lot of SPACs and waiting about 1-2 years before diving into some of the more promising ones. We'll see how it goes!
Re: The Great SPAC Scam: SPACs a Great Deal for Sponsors, but Not Others
#8Right. You pay 20% of the company's value to avoid some legal fees and SEC scrutiny. And then there's an average net loss for investors.
What am I missing? Other than the sponsors, what are people getting out of it? Going "public" and selling shares on the public market without having to disclose anything first? This feels so bubble.
In some cases, the advantage of a SPAC is that it has a senior management team that will take over the acquired company (not unlike a PE deal). For some investors, this makes the target company more attractive than it would have been going public on its own without a management team.
Re: The Great SPAC Scam: SPACs a Great Deal for Sponsors, but Not Others
#9For those investing in public equities: I personally believe some SPACs are definitely worth it in the long run. SPACs suffering on the public markets are a great opportunity to make long-term investments if you are very, very careful and wait a bit longer than most to jump into the right companies. From my experience, the strategic part is to wait until warrants expire. Most SPACs have very, very positive investor p…
There were a few companies that I was waiting for to go public that ended up going the SPAC route around the time I didn't have extra capital to deploy at the time they went public. Now, I'm just glad I didn't. While I still intend to invest once the knife that is their valuations stops falling and starts to rebound on fundamentals, for now they still have a bit more to lose in their valuation to be in line with the rest of the market on your standard metrics eg. P/E.
I'm just not gutsy enough to short the stocks until then.
One thing I am now on the look out for is for short-term short squeezes before initial lockup periods expire.
Re: The Great SPAC Scam: SPACs a Great Deal for Sponsors, but Not Others
#10Right. You pay 20% of the company's value to avoid some legal fees and SEC scrutiny. And then there's an average net loss for investors.
What am I missing? Other than the sponsors, what are people getting out of it? Going "public" and selling shares on the public market without having to disclose anything first? This feels so bubble.
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