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The median return of 2022's SPAC mergers: -82%

pranshum.yarn.tech

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Re: The median return of 2022's SPAC mergers: -82%

#101

Post by wnc3141 »

mitt_romney_12 wrote: post #33
canvascritic wrote: post #2

SPACs, in theory, democratized access to late-stage private markets, aiming to give retail investors an early seat at the table. but like many financial innovations, they're tools that can be wielded wisely or poorly. the high failure rate suggests a misalignment of incentives: founders and sponsors capture immediate liquidity, while long-term outcomes get obfuscated by the structure. I once had a chat with a founder…

> With any financial innovation, there's often a cycle: initial excitement, over-extension, contraction, and then matured understanding I'm a little more cynical, I think the cycle is: a new financial invention comes out, greed causes people to people to pump money into it, eventually the bubble pops or regulators step in. We've seen it time and time again: the dot com bubble, the subprime mortgage bubble, SPACs, and…

I'm curious what your reasoning on PE is. I know the space is struggling, (I'm not exactly rooting for them), but could you give a little context on what bubble and potential regulation is called for?

Re: The median return of 2022's SPAC mergers: -82%

#102

Post by zerbinxx »

fsckboy wrote: post #96
api wrote: post #19

Earlier quoted context omitted.

One of the things I've learned watching the cryptocurrency saga is this: It's hard to get money to be productive. It's hard to get a financial system to do anything other than gamble, pump and dump, scam, and make bubbles.

False. It's hard to get cryptocurrency to do anything productive, it's hard to get cryptocurrency do anything other than gamble, pump, and dump, scam and make bubbles. But the rest of the economy has been making people's lives better for thousands of years. Would you rather live now, or a hundred years ago? a hundred years ago or 200 years ago? repeat till you're satisfied with my argument. If you hit any snags, just…

The “economy” you attribute these increases in QoL to is pretty mercurial - are we talking about mercantilism during the 1700s, robber baron capitalism of the 1910’s, Chinese state capitalism of today, or Western neoliberalism of the 1990’s?

Re: The median return of 2022's SPAC mergers: -82%

#103

Post by danielmarkbruce »

iancmceachern wrote: post #100
throwawaymaths wrote: post #98

Earlier quoted context omitted.

Theranos was fraud. She made material lies about what the machines do. Ponzis are accounting malpractice that don't even necessarily involve defrauding anyone. It's a problem if you're going to call everything that goes south a ponzi scheme, because it elides failure modes and dulls peoples ability to distingush and analyze bad situations. Is social security, for example, a ponzi scheme?

Didn't Ponzi make material lies about what his company did also? It just seems like a dubious distinction. More than what they did being different, I think the laws and terminology around those laws are different now. I don't think there is much pragmatic difference, mostly just semantics no?

There is a meaningful difference. A ponzi scheme involves: schemer takes money from Mr. A. At a later date he takes money from Mr B. He gives some of the money from Mr. B to Mr A, and tells Mr. A that it's "returns". He tells Mr B. all is fine. Then Mr C comes along and his money is given to Mr. A and Mr. B, as "returns". This continues.

It's a very specific type of fraud. Most fraud isn't a ponzi, just like every injury isn't a broken arm. It's silly to go around calling all injuries a broken arm.

Re: The median return of 2022's SPAC mergers: -82%

#104

Post by danielmarkbruce »

Ozzie_osman wrote: post #79
bko wrote: post #58

Earlier quoted context omitted.

How are SPACs a ponzi? My understanding is that its a pool of money that gets raised to essentially take a private organization public through a merger with (theoretically) less red tape and cost. You buy into the SPAC without knowing exactly what is being bought but at the time of purchase you have the option to redeem you investment. There are other clauses if the organizer can't find a suitable takeover target. Yo…

I mean... How is VC a Ponzi? Obviously I'm using a very loose definition, not a technical one, but I'm using the same one Chamath used.

The argument is that VC A's returns a propped up by VC B making an investment at a higher valuation, thereby making VC A's marks look great. They can go raise more money. This can continue for quite some time. While it's not a completely ridiculous analogy to a true ponzi, it's probably better to just call it a bubble. It's closer to a credit bubble, housing bubble etc.

Re: The median return of 2022's SPAC mergers: -82%

#105

Post by simonebrunozzi »

hn_throwaway_99 wrote: post #24

I'm always somewhat amazed that Chamath Palihapitiya doesn't have a much worse reputation: 1. My understanding is that he was the primary initial architect of "A/B testing for engagement" at Facebook that turned social media into a tribalistic, outrage generating machine (nothing engages like hate), and that the rest of SV essentially copied. I think this trajectory would have happened regardless, but he was first, s…

He's smart, he speaks in a way that is very appeasing to news outlet and quite easy to understand and follow, and he seems to understand things really well. This is why he's quite popular.

His SPACs made him billions, and costed a few billions more to the average joe who believed in him.

I think he should be seen as an evil capitalist, from this point of view. I'm not sure if this is the correct way to depict him or not.

Re: The median return of 2022's SPAC mergers: -82%

#106

Post by Lazare »

bko wrote: post #58
Ozzie_osman wrote: post #41

Earlier quoted context omitted.

The interesting thing is a few years ago (before becoming the "SPAC King") he did a media tour where he criticized Venture Capital as being a "massive Ponzi scheme". [1] Then he went all-in on SPACs... Which ended up being the ultimate Ponzi. [1] https://www.cnbc.com/2018/10/10/start-up-economy-is-a-ponzi-...

How are SPACs a ponzi? My understanding is that its a pool of money that gets raised to essentially take a private organization public through a merger with (theoretically) less red tape and cost. You buy into the SPAC without knowing exactly what is being bought but at the time of purchase you have the option to redeem you investment. There are other clauses if the organizer can't find a suitable takeover target. Yo…

When people say something is a ponzi, they generally mean that they think it's deceptive, fraudulent, or otherwise unsavoury. They don't mean that it's literally the sort of scheme made infamous by Charles Ponzi.

I think there's value in using precise language, so I reget this usage, but it's common whether I like it or not.

Re: The median return of 2022's SPAC mergers: -82%

#107

Post by [deleted] »

jhanschoo wrote: post #86
hn_throwaway_99 wrote: post #72

Earlier quoted context omitted.

For some reason calling out "it's not achshually a Ponzi scheme!" is the new "correlation is not causation!!" Yes, I agree with you, it doesn't have the features of the Wikipedia definition of a Ponzi scheme. But language changes over time. I think the salient point that people now think about when calling things a Ponzi scheme is "Early investors are aware that, at its root, the investment sucks. So their goal is to…

And language change results in miscommunication and confusion where a community meets another that doesn't have the same changes in theirs... as has happened here. The use of the more general term fraud would have been more appropriate. That's why we typically aim to use a sanitized, more standard and formal register when communicating broadly rather than to friends and family.

[deleted]

Re: The median return of 2022's SPAC mergers: -82%

#108

Post by qwytw »

jhanschoo wrote: post #86
hn_throwaway_99 wrote: post #72

Earlier quoted context omitted.

For some reason calling out "it's not achshually a Ponzi scheme!" is the new "correlation is not causation!!" Yes, I agree with you, it doesn't have the features of the Wikipedia definition of a Ponzi scheme. But language changes over time. I think the salient point that people now think about when calling things a Ponzi scheme is "Early investors are aware that, at its root, the investment sucks. So their goal is to…

And language change results in miscommunication and confusion where a community meets another that doesn't have the same changes in theirs... as has happened here. The use of the more general term fraud would have been more appropriate. That's why we typically aim to use a sanitized, more standard and formal register when communicating broadly rather than to friends and family.

What the comment above described is not fraud, though. It's much closer to a Ponzi scheme.

Re: The median return of 2022's SPAC mergers: -82%

#109

Post by axpy »

iancmceachern wrote: post #100
throwawaymaths wrote: post #98

Earlier quoted context omitted.

Theranos was fraud. She made material lies about what the machines do. Ponzis are accounting malpractice that don't even necessarily involve defrauding anyone. It's a problem if you're going to call everything that goes south a ponzi scheme, because it elides failure modes and dulls peoples ability to distingush and analyze bad situations. Is social security, for example, a ponzi scheme?

Didn't Ponzi make material lies about what his company did also? It just seems like a dubious distinction. More than what they did being different, I think the laws and terminology around those laws are different now. I don't think there is much pragmatic difference, mostly just semantics no?

It's not because A ==> B that B ==> A. A Ponzi scheme is a fraud but a frauds doesn't necessarily imply a Ponzi scheme. That's is not just semantic, it's a logic falacy.

Re: The median return of 2022's SPAC mergers: -82%

#110

Post by comex »

Lazare wrote: post #106
bko wrote: post #58

Earlier quoted context omitted.

How are SPACs a ponzi? My understanding is that its a pool of money that gets raised to essentially take a private organization public through a merger with (theoretically) less red tape and cost. You buy into the SPAC without knowing exactly what is being bought but at the time of purchase you have the option to redeem you investment. There are other clauses if the organizer can't find a suitable takeover target. Yo…

When people say something is a ponzi, they generally mean that they think it's deceptive, fraudulent, or otherwise unsavoury. They don't mean that it's literally the sort of scheme made infamous by Charles Ponzi. I think there's value in using precise language, so I reget this usage, but it's common whether I like it or not.

Most of the time I’ve seen something called a Ponzi scheme, there is at least some purported element where earlier investors in an asset make money off of later investors in the same asset, without the asset’s true worth actually increasing. That definition isn’t hard to satisfy – it could be something as simple as a stock price becoming overinflated due to hype – and it may even apply to SPACs, but it’s still a more specific requirement than just being fraudulent or unsavory. YMMV.
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