Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

pranshum.yarn.tech

Post reply on HN
Print view View original

31–40 of 134 posts

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

#31

Post by SkyMarshal »

api wrote: post #19
paulgb wrote: post #5

Earlier quoted context omitted.

> SPACs, in theory, democratized access to late-stage private markets Working in finance made me extremely cynical about anything that claims to “democratize” finance. It’s a great idea, as you say, in theory; but in practice what gets branded as “democratization” is really selling retail investors on the table scraps that professionals have already picked over.

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.

True. In general, we need maximal amount of investment and new credit/money creation going into innovation and productivity rather than financial asset speculation or consumption. If it mainly goes into consumption, we get inflation without growth. If it mainly goes into financial asset speculation, we get bubbles and crises. But if it mainly goes into innovation and productivity, we get steady and sustained economic growth without crises or inflation.

The problem with cryptocurrency is that it is inherently separate from the real economy, and difficult to use for direct investment into real world innovation or productivity. Right now, new money creation in cryptocurrency goes mainly into digital asset speculation, resulting in periodic bubbles, and then failures of centralized crypto businesses like FTX, Celsius, etc.

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

#32

Post by throwaway4736 »

SkyMarshal wrote: post #21
throwaway4736 wrote: post #4

Yeah, you all can sit here and make jokes on HN, but you’re not the man in the arena.

I assume this is a tongue-in-cheek reference to Chamath’s latest drama: https://twitter.com/chamath/status/1693992134796603477

Yes.

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

#33

Post by mitt_romney_12 »

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 now/soon (IMO) with PE. My question is how many times this has to happen before we stop viewing it as an isolated with specific product and start to see it as a system issue with our financial system.

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

#34

Post by gmd63 »

lumost wrote: post #28
nocoiner wrote: post #9

Earlier quoted context omitted.

I think there’s a pretty good chance that’s not a very fair statement. OP’s friend was management, not the SPAC sponsor. He would have been subject to a lock-up on his stock following the de-SPAC transaction. There’s a very good chance that the stock price would have declined substantially during that period, so I’m not sure what cash there was for him to grab in the context of the de-SPAC transaction. To briefly be…

There also may be some timing bias. The SPAC craze coincided with the apex of late stage money losing “startups”. Anecdotal evidence indicates that the private markets have done a major repricing of private firms in the last 2 years. It’s intrinsically difficult to value money losing firms. Apple was famously 90 days from bankruptcy, and Uber is now suddenly profitable. Sears is bankrupt, and GE is on the same path.…

I don’t think a SPAC craze coinciding with exits for a bunch of overvalued startups is random

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

#35

Post by yellowstuff »

quickthrower2 wrote: post #15

Median? Who cares. $1 bet. Roll a dice. If you get 1,2 you get zero Otherwise $1.3 Median return is 30% plus prinicpal.

I’m a quant. If all you care about is the realized return of a equal-weighted portfolio than sure, just look at mean return. If you’re trying to understand a strategy in depth you’ll want to look at the entire distribution of hypothetical returns, precisely because financial returns are fat-tailed and portfolio returns are often driven by outliers. I don’t know about SPACs, but for common stock often the outlier returns are in small illiquid stocks where you couldn’t take a large position.

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

#36

Post by lvl102 »

Wall Street banks made a lot of money off of that craze and that’s really the reason number one the Fed didn’t tighten its policy when inflation was flashing red. Never trust the Fed. They merely exist to facilitate monetary policies for Wall Street banks.

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

#37

Post by nwienert »

throwaway4736 wrote: post #30
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 was also a huge bully at Facebook —- it’s well known that everyone strongly disliked him personally —- and his behavior at SocialCapital was so bizarre that every other partner in the firm quit.

[flagged]

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

#39

Post by maxbond »

woleium wrote: post #16

Inverse SPAC ETF when?

Looks like it was called SOGU and run by AXS. Seems to have died in June of this year (based on the observation that it's price chart ends). I didn't find documentation as to why, there's bits and pieces like old prospectuses on AXS's website but they've taken down it's page. I haven't found a notice about wrapping up the fund, and I haven't found anything on Edgar. Their last annual report (per archive.org) seems to be a broken PDF.

But I didn't try that hard, I'm sure the documentation must exist somewhere.

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

#40

Post by Spooky23 »

paulgb wrote: post #5
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…

> SPACs, in theory, democratized access to late-stage private markets Working in finance made me extremely cynical about anything that claims to “democratize” finance. It’s a great idea, as you say, in theory; but in practice what gets branded as “democratization” is really selling retail investors on the table scraps that professionals have already picked over.

Same. Money people don’t give a shit about democracy. If the deals weren’t garbage, their sacred duty to shareholders would take them to a more profitable place.
Post reply on HN