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SPACs are not such a bad idea as it is made out to be, especially at a time like this. Post covid, we are going to see the rise of new winners and segments. Th

SPACs are not such a bad idea as it is made out to be, especially at a time like this. Post covid, we are going to see the rise of new winners and segments. They offer an operating point between VC money and IPO in terms of price vs risk.

AlexandrB 5y ago
I think under normal circumstances this would be true. But VCs seem increasingly bad at picking winners vs. obvious scams (see latest failing SoftBank startup). In this environment, SPACs can be used as a way to dump garbage companies onto the public markets. Consider that WeWork would have probably been considered a great SPAC acquisition target (lots of hype, huge private valuation), while it failed to IPO using normal means because of dodgy financials.
dragontamer 5y ago
Most SPACs sign on "influencers" and "celebrities" who promote the hell out of the SPAC before the group has any clue what they're trying to buy. VC money goes into a company that the VC knows about. IPOs have strict public financial disclosures such that everyone knows how the company operates as it IPOs. A SPAC? You only know that its held by Shaq O'Neal and they're trying to raise money for something something something. And sure, maybe some of us know how to look up the history of the financial types who make up SPACs, but we all know that dumb retail money is just following the celebrities that they're a fan of. ---------- All the people who bought "Current Forest Road" (aka: the Shaq-SPAC) had no idea that they were buying Mixology. They raised money first, and then bought Mixology later. You're pretty much buying the SPAC purely on celebrity presence. There's no fundamentals to analyze, no industry to speculate the future about. Its purely a "lets collect some money together and buy something later" vehicle.
vmception 5y ago
Not a bad idea, but there absolutely are regulatory gaps in disclosure. I don't think fixing those gaps would make a difference because investors don't care.

AlexandrB 5y ago

I think under normal circumstances this would be true. But VCs seem increasingly bad at picking winners vs. obvious scams (see latest failing SoftBank startup). In this environment, SPACs can be used as a way to dump garbage companies onto the public markets. Consider that WeWork would have probably been considered a great SPAC acquisition target (lots of hype, huge private valuation), while it failed to IPO using normal means because of dodgy financials.

dragontamer 5y ago

Most SPACs sign on "influencers" and "celebrities" who promote the hell out of the SPAC before the group has any clue what they're trying to buy. VC money goes into a company that the VC knows about. IPOs have strict public financial disclosures such that everyone knows how the company operates as it IPOs. A SPAC? You only know that its held by Shaq O'Neal and they're trying to raise money for something something something. And sure, maybe some of us know how to look up the history of the financial types who make up SPACs, but we all know that dumb retail money is just following the celebrities that they're a fan of. ---------- All the people who bought "Current Forest Road" (aka: the Shaq-SPAC) had no idea that they were buying Mixology. They raised money first, and then bought Mixology later. You're pretty much buying the SPAC purely on celebrity presence. There's no fundamentals to analyze, no industry to speculate the future about. Its purely a "lets collect some money together and buy something later" vehicle.

vmception 5y ago

Not a bad idea, but there absolutely are regulatory gaps in disclosure. I don't think fixing those gaps would make a difference because investors don't care.