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Maggette


Total Posts: 1301
Joined: Jun 2007
 
Posted: 2021-03-18 08:39
I really start to hate that Chamath Palihapitiya dude.

Presents himself as the protector of the poor retailer in the GameStock episode...and now is promoting that SPAC stuff.

I mean that stuff is sooo transparently build to push money into the "sponsors" and early investors pockets. Is there any real way the vehicles add value?

Ich kam hierher und sah dich und deine Leute lächeln, und sagte mir: Maggette, scheiss auf den small talk, lass lieber deine Fäuste sprechen...

jslade


Total Posts: 1243
Joined: Feb 2007
 
Posted: 2021-03-18 23:16
You can look at it as a way of democratizing participation in IPOs on both ends;
both for "non-accredited" speculators and companies that would have too much difficulty in taking themselves public by the ordinary route, or would be prey to a shitty investment bank setting prices that would guarantee a failed IPO. Also some cheap optionality on the investor side. IBs earn lots of fees; at least they have less power over the transaction.

I think it should be significantly easier to take companies public, and access to IPOs should be a lot more democratic. US tech industry is sclerotic and ripe for creative destruction that won't happen without more capital being invested in new ventures.

Dipshits in the financial media hate it because... probably someone in the VC industry pays them to do so. It's really a lot less ridiculous Shaquille O'Neil and Disney having a SPAC than pretty much anything done recently by Softbank.

"Learning, n. The kind of ignorance distinguishing the studious."

chiral3
Founding Member

Total Posts: 5208
Joined: Mar 2004
 
Posted: 2021-03-19 00:09
Wheat from chaff: crypto/blockchain versus mindless BTC speculation. Easier and more democratic access to IPOs versus mindless speculation. Gamestop of late is the Kardashians of the investing world and it seems that SPACs are heading on that general direction, the common theme between the two being that most of those directly involved have lost money. A saw a quote from Napoleon this morning that has stuck with me: “To understand the man you have to know what was happening in the world when he was twenty.” It's hard to be positive.

Nonius is Satoshi Nakamoto. 物の哀れ

Maggette


Total Posts: 1301
Joined: Jun 2007
 
Posted: 2021-03-19 15:28
I get there should be a less costly process to get listed in a regulated marked. Didn't Palantir skip the classical "you got to hire a white shoe investment bank to do an IPO" and used a service by Citadel?

I guess pushing a product that takes out of the pocket of I-Banks and the VC universe won't get much good press. But I get quite a lot of "good" press.

So far IMHO the game theory/incentive structure doesn't add up.

We will see. Thx for your input guys. Years ago I came on this board as young, naive and optimistic cat....I obviously became an old, naive and grumpy cat :).

Ich kam hierher und sah dich und deine Leute lächeln, und sagte mir: Maggette, scheiss auf den small talk, lass lieber deine Fäuste sprechen...

pj


Total Posts: 3604
Joined: Jun 2004
 
Posted: 2021-03-19 16:42
Somehow SPACs remind me of the immortal:
“company for carrying on an undertaking of great advantage, but nobody to know what it is.”

The older I grow, the more I distrust the familiar doctrine that age brings wisdom Henry L. Mencken

prikolno


Total Posts: 90
Joined: Jul 2018
 
Posted: 2021-03-19 16:49
Do they take something out of the pocket of VCs? I'm of the impression that most VCs actually like the recent wave of SPACs.

Most VCs try to latch on before a company becomes worth 10^8, then the company goes through 1-2 "growth capital" rounds in the pre-10^9 stage. A corollary of this is that startups will often pull shenanigans to cross the 100M ARR hurdle. Say, burn cash on an unsustainable sales team (SNOW) or to acquire old, unprofitable businesses that have high revenue and repackage the losses with the high-growth startup shine.

Very few VCs have the powder or mandate from their LPs to participate consistently in the growth capital stage (only DST and 9984.T come to mind), so they don't see the SPACs as taking away their opportunities or fundraising pool. It's a good thing for the VCs that they have a less cumbersome mechanism to exit, e.g. the early investors in NKLA were almost definitely happy to bypass the 100M ARR threshold.

But I can see PE firms focused on the growth capital stage getting burned from this (TPG, Silver Lake, GA).

Maggette


Total Posts: 1301
Joined: Jun 2007
 
Posted: 2021-03-19 18:06
@prikolno

I guess you are right. It is actually an faster and easier way for VCs to pump retail "dumb money" money into IPOs.

Ich kam hierher und sah dich und deine Leute lächeln, und sagte mir: Maggette, scheiss auf den small talk, lass lieber deine Fäuste sprechen...

TonyC
Nuclear Energy Trader

Total Posts: 1361
Joined: May 2004
 
Posted: 2021-03-22 05:24
PJ wrote:
Posted: 2021-03-19 10:42
" Somehow SPACs remind me of the immortal:
“company for carrying on an undertaking of great advantage, but nobody to know what it is." "

"ding ding ding ding ding" ... this man just won Double Jeopardy .... give him the prize

flaneur/boulevardier/remittance man/energy trader

TonyC
Nuclear Energy Trader

Total Posts: 1361
Joined: May 2004
 
Posted: 2021-03-22 05:33
if somebody came up to me and said "hey TonyC, here is $500 million. you want to run a 500 million hedge fund, or do you want to sponsor a $500 million spac? It's your call"

I'd ponder it for a while and then a little voice in my head would say "wait, if it's a 500 million hedge fund and it works, I get to keep 20% of just the profits. if it's a 500 million spac, I get to keep 20% of the entire company"

pretty sure I know how I'd spend my time ... and that explains the explosion in spacs

flaneur/boulevardier/remittance man/energy trader

deeds


Total Posts: 512
Joined: Dec 2008
 
Posted: 2021-03-22 11:15

as i understand it, one of the biggest differences in the process from target's point of view is a significantly different diligence standard and, significantly, a different category of agent...the VC/PE process is now extended until the public gets a shot...exec in fintechy finservices target: underwriters want to see 3 years of cohort data...in the SPAC process, VC acquirers just need 1 year...we found that appealing

my concern is that the SPAC process removes a (stodgy) 'fresh set of eyes' and some measure of roadshowing in the debut process. agree that these can be confiscatory, inefficient and cause systematic investor error...they are also a governor (of some type, strictly in the engineering sense...) on the process before equity is offered to investors with less sophistication. (admit that banking interns probably aren't any more profound or careful than VC interns, there is an interesting culture/incentive discussion, but my thought is the old mechanism has already had its shocks and re-bracings...the new one is waiting)

auditors (and anemic financial specialists) seem to play an exaggerated role as disclosures have a new weight but lower quality input and shorter timetables for preparation...




chiral3
Founding Member

Total Posts: 5208
Joined: Mar 2004
 
Posted: 2021-03-25 16:50
I see today that the SEC has launched an inquiry. I've been through these and they sound more interesting than the headline. They typically involve the research arm of the SEC reaching out for voluntary discussion from market participants and they issue a white-paper-like report that may or may not lead to a hand off with the enforcement arm. In some respects it reminds me of the relationship between theorists and experimentalists. But I note the language used by BBG: "There is typically a sizable gap between when the SPAC lists and when it actually acquires a company... During that period, they are not allowed to talk about what specific targets they are looking at."

Nonius is Satoshi Nakamoto. 物の哀れ
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