3 ms·

Meh. SPACs have a pretty simple purpose: allowing companies to IPO without it officially being an IPO (eg much less disclosure for example). For the companies

Meh. SPACs have a pretty simple purpose: allowing companies to IPO without it officially being an IPO (eg much less disclosure for example). For the companies they can avoid the risk of the IPO. If wework had gone public via SPAC they would have actually gone public (although wework looked pretty bullshit even before everyone stopped wanting so much office space) and not just been a big embarrassment. I think it’s also popular for VCs to not like IPOs at the moment (if the price goes down that’s bad. If the price goes up they’ve been ripped off in the investment they got. At the moment it seems newly public stock is in high demand so every IPO feels like a rip-off.) Maybe they like SPACs better. For investors a SPAC exposes them to the IPO pop: like the investors in an IPO, the SPAC reduces the risk of going public to the company and they expect to get paid for that by getting stock slightly cheaper than they expect; but those investors also get optionality when the deal is announced. Ordinarily small investors wouldn’t get the chance to participate in IPOs. For the managers they get massive payouts, even bigger than investment banks get for IPOs. Maybe those will go down if SPACs become popular and mature and competitive. (Though note that there are some incentives for managers to get a good deal.) And probably there are lots of people enjoying and getting money out of trying to figure out how to price shares in SPACs and the warrants, especially while there is a lot of variety. Maybe you think SPACs are great or maybe you think they’re cheating regulations or siphoning off money to rich bankers or random celebrities and should be made illegal. There are some economic reasons to expect a SPAC share to be worth more than the investment it corresponds to, and there are social reasons to be wary of SPACs. I don’t think the article does a great job of discussing either.

ketamine__ 6y ago
There are lots of great companies out there that are increasing earnings every year. No need to invest in this crap.
fennecfoxen 6y ago
> If wework had gone public via SPAC they would have actually gone public (although wework looked pretty bullshit even before everyone stopped wanting so much office space) and not just been a big embarrassment. Funny you mention it; WeWork is in talks to be acquired by SPAC BowX, though it might also depend on SoftBank talking Adam Neumann into taking a $500 million haircut: https://www.wsj.com/articles/wework-co-founder-adam-neumann-nears-settlement-with-softbank-11614033832 https://www.wsj.com/articles/wework-co-founder-adam-neumann-...
xwolfi 6y ago
Small investors can participate in IPO where regulation allows it (so vote for that). Here in Hong Kong, every grandma rushes to the bank at every IPO to stuff her pocket with pre-allocated retail blocks of 1 to 10k USD. Do you want your grandma to do this ? You can vote for it, but be ready for what it means. For me what it means is that the "poor little small investor" is a fallacy, most small investors are retired landlords/rent earners, not struggling productive young people and giving more leeway to retail investor just make old people either consolidate more or risk more when they rely on high cost of survival. Fine, but be ready to see none of the young people invest in IPO because they earn a salary or don't have a capital large enough, and a LOT of the whiny old fucks lose all their savings and vote pro-China to spite you :D SPAC are a travesty imho, we do it often in Hong Kong too, because why not be creative if it can also give you the pleasure of bypassing regulation, hiding that your Chinese forestry company never saw a forest or whatever, but frankly I don't see any social or financial value. You ask for public money, you give public information, it was the first commandment of capitalism... As for the banks' commission, it's well deserved and usually a function of the volume they bring via marketing. I suppose you could bypass the banks in an IPO by building a small department in your company doing just that, but good luck calling people you made rich 10 times over to sell them the next unicorn. People will just scoff at you selling your own crap. It's like being a restaurant with a 10x increase in orders from foodpanda whining about their awful commission rate. Fine, do it and see or figure a way to make margins with it anyway.

ketamine__ 6y ago

There are lots of great companies out there that are increasing earnings every year. No need to invest in this crap.

fennecfoxen 6y ago

> If wework had gone public via SPAC they would have actually gone public (although wework looked pretty bullshit even before everyone stopped wanting so much office space) and not just been a big embarrassment. Funny you mention it; WeWork is in talks to be acquired by SPAC BowX, though it might also depend on SoftBank talking Adam Neumann into taking a $500 million haircut: https://www.wsj.com/articles/wework-co-founder-adam-neumann-nears-settlement-with-softbank-11614033832 https://www.wsj.com/articles/wework-co-founder-adam-neumann-...

xwolfi 6y ago

Small investors can participate in IPO where regulation allows it (so vote for that). Here in Hong Kong, every grandma rushes to the bank at every IPO to stuff her pocket with pre-allocated retail blocks of 1 to 10k USD. Do you want your grandma to do this ? You can vote for it, but be ready for what it means. For me what it means is that the "poor little small investor" is a fallacy, most small investors are retired landlords/rent earners, not struggling productive young people and giving more leeway to retail investor just make old people either consolidate more or risk more when they rely on high cost of survival. Fine, but be ready to see none of the young people invest in IPO because they earn a salary or don't have a capital large enough, and a LOT of the whiny old fucks lose all their savings and vote pro-China to spite you :D SPAC are a travesty imho, we do it often in Hong Kong too, because why not be creative if it can also give you the pleasure of bypassing regulation, hiding that your Chinese forestry company never saw a forest or whatever, but frankly I don't see any social or financial value. You ask for public money, you give public information, it was the first commandment of capitalism... As for the banks' commission, it's well deserved and usually a function of the volume they bring via marketing. I suppose you could bypass the banks in an IPO by building a small department in your company doing just that, but good luck calling people you made rich 10 times over to sell them the next unicorn. People will just scoff at you selling your own crap. It's like being a restaurant with a 10x increase in orders from foodpanda whining about their awful commission rate. Fine, do it and see or figure a way to make margins with it anyway.