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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,

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.

pcthrowaway 6y ago
Legitimately confused by this claim. These companies all do tons of acquisitions
- an_opabinia 6y ago
  Honey, for example. It would have been a great SPAC target. PayPal acquired it - PayPal is unusual in acquiring companies with 1-10b valuations. There is opportunity there. Microsoft last bought LinkedIn - for $22b in cash and stock, that one acquisition is really expensive and definitely not “midcap.” NVIDIA got ARM for $12b cash, $21.5b stock. Also huge. Facebook is really interesting in this regard because its multi billion acquisitions - Instagram, WhatsApp, Oculus - all had finance people saying they overpaid. Maybe they did overpay! In the sense that if those companies SPAC’d instead, the price the vehicle would pay would be lower - not in some subjective sense if those were or were not good acquisitions, they obviously were. So if I had the opportunity to bid against Facebook for Instagram or against PayPal for Honey, I would! SPACs let me do that. The curious thing is that Facebook isn’t bidding on those companies anymore - Snap said no and TikTok isn’t possible - so... does that mean Instagram would have been cheaper? That would have been an amazing opportunity. Otherwise we’re talking about smaller acquisitions. For example, Apple bought a lot of companies that probably chose acquisition because they would have been microcap IPOs and thus not tradable by Robinhood users - and maybe that’s really the flip side of this.
HNfriend234 6y ago
That's from a business perspective. I'm talking about from an investing/speculating aspect of them. One of the reasons why SPACs have become so popular among retail investors is because of hype on social media around them.
anonu 6y ago
You're right midcaps are unfavored and cheap. They are in fewer indices and funds tend not to benchmark against midcaps. But I don't think this has anything to do with cash piles at large cap firms.

pcthrowaway 6y ago

Legitimately confused by this claim. These companies all do tons of acquisitions

an_opabinia 6y ago
Honey, for example. It would have been a great SPAC target. PayPal acquired it - PayPal is unusual in acquiring companies with 1-10b valuations. There is opportunity there. Microsoft last bought LinkedIn - for $22b in cash and stock, that one acquisition is really expensive and definitely not “midcap.” NVIDIA got ARM for $12b cash, $21.5b stock. Also huge. Facebook is really interesting in this regard because its multi billion acquisitions - Instagram, WhatsApp, Oculus - all had finance people saying they overpaid. Maybe they did overpay! In the sense that if those companies SPAC’d instead, the price the vehicle would pay would be lower - not in some subjective sense if those were or were not good acquisitions, they obviously were. So if I had the opportunity to bid against Facebook for Instagram or against PayPal for Honey, I would! SPACs let me do that. The curious thing is that Facebook isn’t bidding on those companies anymore - Snap said no and TikTok isn’t possible - so... does that mean Instagram would have been cheaper? That would have been an amazing opportunity. Otherwise we’re talking about smaller acquisitions. For example, Apple bought a lot of companies that probably chose acquisition because they would have been microcap IPOs and thus not tradable by Robinhood users - and maybe that’s really the flip side of this.

HNfriend234 6y ago

That's from a business perspective. I'm talking about from an investing/speculating aspect of them. One of the reasons why SPACs have become so popular among retail investors is because of hype on social media around them.

anonu 6y ago

You're right midcaps are unfavored and cheap. They are in fewer indices and funds tend not to benchmark against midcaps. But I don't think this has anything to do with cash piles at large cap firms.