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SPACs collapse as $11B of deals are called off within an hour

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Re: SPACs collapse as $11B of deals are called off within an hour

#51

Post by cool_dude85 »

azinman2 wrote: post #43
this_user wrote: post #41

Earlier quoted context omitted.

Not really. You just have to ask yourself why these private companies were even going the SPAC route rather than do a regular IPO. The answer was usually that these were not particularly great companies, and doing an IPO means the company is put under a lot of scrutiny. SPACs are a way to avoid that, so insiders can cash out.

Or they were high capital low margin businesses. There are many of these out there, like defense or airline businesses. We need them to exist, but investors don’t like them because it’s harder to make money from them. It doesn’t mean the business is bad, it just means payoff is longer. SPACs are one of the few ways they can get money.

So then what are the high capital low margin businesses that are forgoing a traditional IPO and using a SPAC instead?

Re: SPACs collapse as $11B of deals are called off within an hour

#52

Post by anjel »

htag wrote: post #46

> The pair of cancellations, which happened less than an hour apart Is this literally just two cancellations? I never put any money into a SPAC, but I suspect the shareholders are better off with their money returned than going into a bad deal. Concord raised money at $10/share, and they are returning $10/share back. I don't feel bad for the investor that bought it for $13/share from an exchange and lost $3. Concord…

According to the New York Times, SPAC redemptions industry wide were 50% this year, up from 20% last year. https://archive.ph/1Fa9V

Re: SPACs collapse as $11B of deals are called off within an hour

#53

Post by jfengel »

fastball wrote: post #39
jfengel wrote: post #36

Earlier quoted context omitted.

Presumably the SPAC itself must go through some IPO-like process in order to get listed. If it doesn't get listed then its shares aren't liquid. I take it that they are subject to little scrutiny since it's just "we're a company with no business but a ton of capital", and the exchange and SEC say "sounds legit to me". Then they can "take over" the target, again with little scrutiny. Have I got that right?

I mentioned that they IPO in the second paragraph. And yep, that's about right. Detractors claim it avoids filing regulations and that is bad while proponents say that it justifiably avoids direct listing which can be prohibitively time-consuming / expensive.

Ah, missed that part. Thank you very much.

Re: SPACs collapse as $11B of deals are called off within an hour

#54

Post by yieldcrv »

EGreg wrote: post #40
JumpCrisscross wrote: post #29

Earlier quoted context omitted.

> it is just a redemption of money Plenty of secondary buyers lost money. To say nothing of everyone who owns Circle.

Wait which Circle? I remember a decade ago Circle being a startup where VCs all invested like $30M in an early round and a month later the entire startup went bankrupt. That Circle?

Not that circle

This circle doesn't need to go public, just jumped at the opportunity to have SPAC dumb money

Re: SPACs collapse as $11B of deals are called off within an hour

#55

Post by htag »

anjel wrote: post #52
htag wrote: post #46

> The pair of cancellations, which happened less than an hour apart Is this literally just two cancellations? I never put any money into a SPAC, but I suspect the shareholders are better off with their money returned than going into a bad deal. Concord raised money at $10/share, and they are returning $10/share back. I don't feel bad for the investor that bought it for $13/share from an exchange and lost $3. Concord…

According to the New York Times, SPAC redemptions industry wide were 50% this year, up from 20% last year. https://archive.ph/1Fa9V

SPAC redemptions are just investors asking for their money back so they can use it elsewhere. From the SPAC share owner's perspective this is the system working as intended.

Redemptions lower the amount of money in the fund, which gives them weaker negotiating power when making the acquisition. I won't feel bad for the fund manager doesn't have enough money to buy the investment they had their eyes on. The downturn across all SPACs gives them less negotiating power as a class, but again, that's not a big loss for society.

Re: SPACs collapse as $11B of deals are called off within an hour

#56

Post by EGreg »

gumby wrote: post #47
kapildev wrote: post #42

Earlier quoted context omitted.

Innocent question: how do I check whether I am being downvoted? Is this something you see only after you cross the 500 karma points? A quick Google search didn't return anything related.

other commenters tell you or you can just see your comment text become grey rather than black.

How would other commenters know? :)

Re: SPACs collapse as $11B of deals are called off within an hour

#57

Post by conorcleary »

Kon-Peki wrote: post #38

I'm crossing my fingers! We get a daily file from a vendor containing corporate action data, because somebody "needs" it for some report or something, and so we dutifully ingest it into our system. But every 2 or 3 months, a specific planned SPAC merger shows up in that file. Something to do with gambling and crypto/blockchain, based in the Med. Every single time it shows up, it causes the vendor file to fail the ven…

No post body was provided.

Re: SPACs collapse as $11B of deals are called off within an hour

#58

Post by ElijahLynn »

taywrobel wrote: post #21
ElijahLynn wrote: post #11

What is a SPAC?

Not sure why you’re getting downvoted, this is a primarily tech forum and a SPAC is a primarily business concept. It means a “special purpose acquistion company”. It’s effectively a company set up for the express purpose of facilitating an acquistion or merger of companies, so that assets or IP ownership can be moved in an optimally tax or otherwise cost efficient way. Many have argued they provide no value except fo…

Thank you, I had no idea and think many others didn't either.

Re: SPACs collapse as $11B of deals are called off within an hour

#59

Post by AlbertCory »

this_user wrote: post #41
boringg wrote: post #4

Any successful SPACs out there?

Not really. You just have to ask yourself why these private companies were even going the SPAC route rather than do a regular IPO. The answer was usually that these were not particularly great companies, and doing an IPO means the company is put under a lot of scrutiny. SPACs are a way to avoid that, so insiders can cash out.

One that I know of is Wheels Up. It's a membership company for flying privately.

Private flights are insanely expensive, so at least there's a need. Unfortunately, there are also pretty high costs. No idea what Wheels Up financials look like.

Re: SPACs collapse as $11B of deals are called off within an hour

#60

Post by chii »

jfengel wrote: post #36
fastball wrote: post #30

Earlier quoted context omitted.

A SPAC, or Special Purpose Acquisition Company, is a type of investment vehicle that is formed for the purpose of acquiring or merging with another company. SPACs are often used as an alternative to the traditional initial public offering (IPO) process, as they provide a faster and more efficient way for a private company to become publicly traded. SPACs are typically created by a group of investors, who raise money…

Presumably the SPAC itself must go through some IPO-like process in order to get listed. If it doesn't get listed then its shares aren't liquid. I take it that they are subject to little scrutiny since it's just "we're a company with no business but a ton of capital", and the exchange and SEC say "sounds legit to me". Then they can "take over" the target, again with little scrutiny. Have I got that right?

The SEC requires disclosure of financial data in a regulated way, and a prospectus that does not use forward looking statements or something akin to that.

The SPAC going public can comply with those rules, because the business of the SPAC is simple (buy another business with the raised capital), and thus there's probably very little friction in their disclosure. Plus it can be done ahead of time - without knowing which company the SPAC might acquire.

It's a backdoor IPO basically. The "with little scrutiny" is assumed to be acceptable, because iirc, only accredited investors are investing i SPACs.

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