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

A Sober Look at SPACs (2020)

dx.doi.org

Post reply on HN
Print view View original

81–90 of 119 posts

Re: A Sober Look at SPACs (2020)

#81

Post by wtf_is_up »

dontreact wrote: post #56
HNfriend234 wrote: post #52

I invest in SPACs regularly and have made a killing off investing in them. Plain and simple, SPACs are all about hype in terms of how much hype the target company can garner. I only buy pre-LOI SPACs and then consider selling them on the merger announcement or right before the merger completes. This strategy works because of social media. People go around social media to hype up the company so to a certain extent it…

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?

Look for SPACs close to NAV and plant some seeds. You can almost consider these cash accounts since they won't go much below NAV pre-merger so there is a window of assymmetric risk. Once a target is in place you can do research and decide if you want to adjust. Not everything skyrockets after target is revealed. Canoo and Utz were less sexy plays that paid off and were easily researchable.

If you're just chasing hype, you buy one of Chamath's myriad of SPACs and trust in his ability to pimp himself at every opportunity.

Re: A Sober Look at SPACs (2020)

#82

Post by Judgmentality »

hntrader wrote: post #76
jtdev wrote: post #68

Earlier quoted context omitted.

Okay, but this still seems like a perversion of market mechanics that should be regulated/banned.

Sort of like fractional reserve banking? In practice it doesn't make a big difference whether it's banned or not. Stocks almost never have a short-interest above 100%, and the larger the short-interest the less attractive it becomes to join in so there's already negative feedback built in.

> In practice it doesn't make a big difference whether it's banned or not. Stocks almost never have a short-interest above 100%

Except it just happened? This is like arguing for not fixing a really weird state in code. "It's not supposed to be able to get into that state so we just ignore it."

Re: A Sober Look at SPACs (2020)

#83

Post by [deleted] »

jtdev wrote: post #68
mikeyouse wrote: post #53

Earlier 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…

Okay, but this still seems like a perversion of market mechanics that should be regulated/banned.

[deleted]

Re: A Sober Look at SPACs (2020)

#84

Post by snarkypixel »

My slightly different look on SPACs:

SPACs are more like Handshake deals.

When two people trust each others, you can save a lot of time and money with a handshake deal. You agree on something, and then (optionally) get lawyers do the paperwork.

I find SPACs similar because investors and the SPAC owners have a mutual trust about smartly using that raised money to bring a great companies public.

You can totally get burned, but personally I trust someone like Chamath to make great decisions. So, in my view, I've got a handshake deal with him where he smartly uses my capital to bring great companies public. It's a win win.

Re: A Sober Look at SPACs (2020)

#85

Post by an_opabinia »

HNfriend234 wrote: post #52

I invest in SPACs regularly and have made a killing off investing in them. Plain and simple, SPACs are all about hype in terms of how much hype the target company can garner. I only buy pre-LOI SPACs and then consider selling them on the merger announcement or right before the merger completes. This strategy works because of social media. People go around social media to hype up the company so to a certain extent it…

The reason SPACs work has nothing to do with hype. People hype shit on the Internet all the time. There's no insight here.

One reason SPACs work is that Apple, Google, Amazon, Facebook, Berkshire Hathaway and (to a lesser extent) Microsoft are sitting on huge cash piles and not doing acquisitions. For almost a decade. So of course high quality mid-caps are going to be "cheap." So while I appreciate your appeal to stuff that isn't fundamentals, it seems like the imbalance between supply of midcaps and demand for acquiring them would be an opportunity.

Re: A Sober Look at SPACs (2020)

#86

Post by hntrader »

Judgmentality wrote: post #82
hntrader wrote: post #76

Earlier quoted context omitted.

Sort of like fractional reserve banking? In practice it doesn't make a big difference whether it's banned or not. Stocks almost never have a short-interest above 100%, and the larger the short-interest the less attractive it becomes to join in so there's already negative feedback built in.

> In practice it doesn't make a big difference whether it's banned or not. Stocks almost never have a short-interest above 100% Except it just happened? This is like arguing for not fixing a really weird state in code. "It's not supposed to be able to get into that state so we just ignore it."

> This is like arguing for not fixing a really weird state in code

That's not a valid analogy. The reason we fix bugs and address code smells is that the cost of doing so is relatively low and the benefit is large from both a tail-risk mitigation perspective and technical debt perspective.

If we're going to go through the rigmarole of passing new regulations in order to solve some problem, the problem should be of sufficient magnitude to justify the associated costs:

(i) The cost of compliance to industry, which would be humongous, since you now need a centralized authority to track who owns the actual float versus the shorted float, and for this information to be communicated between all stakeholders & said authority. Then each stakeholder needs to build internal processes and software around this data to ensure they are compliant.

(ii) The time & financial cost of enforcement and penalties, to both regulators (taxpayer) and industry.

(iii) Possible unintended consequences, such as corporatist corruption of the specifics in order to entrench established interests.

Evidence or reason hasn't been provided that this is even a problem, let alone a problem of any meaningful magnitude deserving of regulation.

Re: A Sober Look at SPACs (2020)

#87

Post by Judgmentality »

hntrader wrote: post #86
Judgmentality wrote: post #82

Earlier quoted context omitted.

> In practice it doesn't make a big difference whether it's banned or not. Stocks almost never have a short-interest above 100% Except it just happened? This is like arguing for not fixing a really weird state in code. "It's not supposed to be able to get into that state so we just ignore it."

> This is like arguing for not fixing a really weird state in code That's not a valid analogy. The reason we fix bugs and address code smells is that the cost of doing so is relatively low and the benefit is large from both a tail-risk mitigation perspective and technical debt perspective. If we're going to go through the rigmarole of passing new regulations in order to solve some problem, the problem should be of su…

> If we're going to go through the rigmarole of passing new regulations in order to solve some problem, the problem should be of sufficient magnitude to justify the associated costs

Agreed.

> Evidence or reason hasn't been provided that this is even a problem

Strongly disagree. I realize there's lots of noise right now, but the signal is starting to shake out in the news.

> let alone a problem of any meaningful magnitude deserving of regulation

This is the interesting part I'm hoping is actually debated. But somehow I don't think it's ever really going to be discussed by the SEC, the same way I feel like 2008 was just a bunch of slaps on the wrist (what happened in 2008 was much, much, much worse than what happened recently with GME to my knowledge and I am not saying they are equivalent).

Re: A Sober Look at SPACs (2020)

#88

Post by hntrader »

Judgmentality wrote: post #87
hntrader wrote: post #86

Earlier quoted context omitted.

> This is like arguing for not fixing a really weird state in code That's not a valid analogy. The reason we fix bugs and address code smells is that the cost of doing so is relatively low and the benefit is large from both a tail-risk mitigation perspective and technical debt perspective. If we're going to go through the rigmarole of passing new regulations in order to solve some problem, the problem should be of su…

> If we're going to go through the rigmarole of passing new regulations in order to solve some problem, the problem should be of sufficient magnitude to justify the associated costs Agreed. > Evidence or reason hasn't been provided that this is even a problem Strongly disagree. I realize there's lots of noise right now, but the signal is starting to shake out in the news. > let alone a problem of any meaningful magni…

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 tend to lean towards the idea that naked shorting should be allowed and encouraged. I believe we'd have a healthier market with less pump and dumps, since retail won't be able to lock the float on penny stocks and cause a squeeze, because borrow supply would be greater which (i) reduces the cost of borrow, and (ii) allows large institutions to take the other side effectively and maintain efficient pricing.

Re: A Sober Look at SPACs (2020)

#89

Post by Judgmentality »

hntrader wrote: post #88
Judgmentality wrote: post #87

Earlier quoted context omitted.

> If we're going to go through the rigmarole of passing new regulations in order to solve some problem, the problem should be of sufficient magnitude to justify the associated costs Agreed. > Evidence or reason hasn't been provided that this is even a problem Strongly disagree. I realize there's lots of noise right now, but the signal is starting to shake out in the news. > let alone a problem of any meaningful magni…

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 tend to lean towards the idea that naked shorting should be allowed and encouraged. I believe we'd have a healthier market with less pump and dumps, since retail won't be able to lock the float on penny stocks and cause a squeeze, because borrow supply would be greater which (i) reduces the cost of borrow, and (ii) allows large institutions to take the other side effectively and maintain efficient pricing.

Interesting. I'm not sure I agree, but I appreciate the perspective.

Re: A Sober Look at SPACs (2020)

#90

Post by kelnos »

Judgmentality wrote: post #82
hntrader wrote: post #76

Earlier quoted context omitted.

Sort of like fractional reserve banking? In practice it doesn't make a big difference whether it's banned or not. Stocks almost never have a short-interest above 100%, and the larger the short-interest the less attractive it becomes to join in so there's already negative feedback built in.

> In practice it doesn't make a big difference whether it's banned or not. Stocks almost never have a short-interest above 100% Except it just happened? This is like arguing for not fixing a really weird state in code. "It's not supposed to be able to get into that state so we just ignore it."

> 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?

Post reply on HN