4 ms·

Super dumb question: As far as I see, SPACs are usually smaller than the companies they acquire. What keeps a company from just paying out some profit to the fo

Super dumb question: As far as I see, SPACs are usually smaller than the companies they acquire. What keeps a company from just paying out some profit to the founders, them setting up a SPAC themselves from that money, IPO it and then reverse merging the company? Is it time to market? Conflict of interest? Are there limitations to the size difference? I'm just thinking that since the "vehicle" seems to be useful, shouldn't there a race to the bottom be going on in terms of sponsor margins? As in essence, the value any of them provide seems to be pretty replaceable to me. Or what else do they bring to the table than an empty hull?

boeingUH60 5y ago
I think there'll be major conflict of interest if a founder does that. The closest thing I've observed to that scenario is Group Nine, a digital media company, which launched a SPAC that it planned to merge with another media company, then merge with itself. Group Nine, however, recently merged itself (minus its SPAC) with a rival, Vox Media, and hasn't talked about the plans for the SPAC henceforth, but it's suspected that the combined Group Nine-Vox Media will merge with it. https://techcrunch.com/2021/01/15/group-nines-spac-goes-public/ https://techcrunch.com/2021/01/15/group-nines-spac-goes-publ... https://www.vox.com/recode/2021/12/13/22833341/vox-media-group-nine-deal-explained https://www.vox.com/recode/2021/12/13/22833341/vox-media-gro...
robbiep 5y ago
It’s not legal to have a target acquisition in mind when you start a SPAC
- enduroman 5y ago
  Tell that to Jay Sidhu and BankMobile/bmtx. Started his SPAC when the Flagship acquisition of BankMobile was failing. After never being able to dump the asset from Customers Bank, his son's SPAC purchased BankMobile.
  - boeingUH60 5y ago
    Or Patrick Orlando and Donald Trump, who reportedly discussed their SPAC merger months before Orlando sold shares to investors. But then, I think enforcing this no-contact law will be hard, i.e. difficult to prove unless regulators obtain explicit proof of a conversation between interested parties. https://www.nytimes.com/2021/12/07/business/dealbook/trump-media-spac.html https://www.nytimes.com/2021/12/07/business/dealbook/trump-m...
  - toolz 5y ago
    It would be hilarious if it weren't so sad how preferential treatment from the SEC is. I wonder if they're just lazy or if there really just is a wall street nepotism club. Kinda amazing how much trust people put into an institution with the bulk of their net worth that routinely ignores and enforces rules arbitrarily.
xyzzy21 5y ago
Imagine an IPO for a company without any requirement to make money, follow conventional accounting standards, delivery any actual product. It's an open-ended but legalized form of money laundering and fraud.

boeingUH60 5y ago

I think there'll be major conflict of interest if a founder does that. The closest thing I've observed to that scenario is Group Nine, a digital media company, which launched a SPAC that it planned to merge with another media company, then merge with itself. Group Nine, however, recently merged itself (minus its SPAC) with a rival, Vox Media, and hasn't talked about the plans for the SPAC henceforth, but it's suspected that the combined Group Nine-Vox Media will merge with it. https://techcrunch.com/2021/01/15/group-nines-spac-goes-public/ https://techcrunch.com/2021/01/15/group-nines-spac-goes-publ... https://www.vox.com/recode/2021/12/13/22833341/vox-media-group-nine-deal-explained https://www.vox.com/recode/2021/12/13/22833341/vox-media-gro...

robbiep 5y ago

It’s not legal to have a target acquisition in mind when you start a SPAC

enduroman 5y ago
Tell that to Jay Sidhu and BankMobile/bmtx. Started his SPAC when the Flagship acquisition of BankMobile was failing. After never being able to dump the asset from Customers Bank, his son's SPAC purchased BankMobile.
- boeingUH60 5y ago
  Or Patrick Orlando and Donald Trump, who reportedly discussed their SPAC merger months before Orlando sold shares to investors. But then, I think enforcing this no-contact law will be hard, i.e. difficult to prove unless regulators obtain explicit proof of a conversation between interested parties. https://www.nytimes.com/2021/12/07/business/dealbook/trump-media-spac.html https://www.nytimes.com/2021/12/07/business/dealbook/trump-m...
- toolz 5y ago
  It would be hilarious if it weren't so sad how preferential treatment from the SEC is. I wonder if they're just lazy or if there really just is a wall street nepotism club. Kinda amazing how much trust people put into an institution with the bulk of their net worth that routinely ignores and enforces rules arbitrarily.

xyzzy21 5y ago

Imagine an IPO for a company without any requirement to make money, follow conventional accounting standards, delivery any actual product. It's an open-ended but legalized form of money laundering and fraud.