The median return of 2022's SPAC mergers: -82%
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The median return of 2022's SPAC mergers: -82%
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Re: The median return of 2022's SPAC mergers: -82%
#2SPACs, 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 who merged his startup with a SPAC. He mentioned that the allure wasn't just the capital but the perceived simplicity of the process, compared to a traditional IPO. But looking back, he felt that the rigorous scrutiny of the traditional path might have forced his team to address underlying business challenges they'd later face.
in any event the real question here isn’t whether SPACs as a vehicle are intrinsically flawed, but if the market’s appetite for risk, combined with the allure of quick liquidity, blinded many to fundamentals during the 2020 bubble. With any financial innovation, there's often a cycle: initial excitement, over-extension, contraction, and then matured understanding. Perhaps we're in the contraction phase for spacs, but they might still find a place in a more judicious market
Re: The median return of 2022's SPAC mergers: -82%
#3SPACs, 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…
Misalignment of incentives is such an understatement.
> But looking back, he felt that the rigorous scrutiny of the traditional path might have forced his team to address underlying business challenges they'd later face.
This is such a politically correct way of saying “we didn’t want to be scrutinized so we took the quick cash and ran instead.”
Re: The median return of 2022's SPAC mergers: -82%
#4Yeah, you all can sit here and make jokes on HN, but you’re not the man in the arena.
Re: The median return of 2022's SPAC mergers: -82%
#5SPACs, 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.
Re: The median return of 2022's SPAC mergers: -82%
#6SPACs, 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…
Democratized access is quite the silver lining. Retail investors got taken to the cleaners.
Re: The median return of 2022's SPAC mergers: -82%
#7Yeah, you all can sit here and make jokes on HN, but you’re not the man in the arena.
the arena is stupid and it's fair to point that out.
Re: The median return of 2022's SPAC mergers: -82%
#8Yeah, you all can sit here and make jokes on HN, but you’re not the man in the arena.
I mean, the man knew he was going to relinquish his joke privileges when he decided to try his luck in the arena. Seems like a fair tradeoff to me!
Re: The median return of 2022's SPAC mergers: -82%
#9SPACs, 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…
Misalignment of incentives is such an understatement. > But looking back, he felt that the rigorous scrutiny of the traditional path might have forced his team to address underlying business challenges they'd later face. This is such a politically correct way of saying “we didn’t want to be scrutinized so we took the quick cash and ran instead.”
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 an executive of a failing public company doesn’t sound very enticing to me. At all.
It sounds to me like OP’s friend’s company was overly eager to go public but with the benefit of hindsight realized that it wasn’t the right choice for the business.
Re: The median return of 2022's SPAC mergers: -82%
#10SPACs, 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…
Democratized access is quite the silver lining. Retail investors got taken to the cleaners.
It democratized access to losing money. Not only the VCs and PE could do it, now retail could.