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Why? It’s not like these are pink sheet companies being sold out of boiler rooms to retirees. The people losing their shirts on these SPACs are greedy gamblers.
by bradleyjg 4y ago
Why? It’s not like these are pink sheet companies being sold out of boiler rooms to retirees. The people losing their shirts on these SPACs are greedy gamblers. I don’t think we need to waste regulation resources protecting them from themselves. There are polluters and things to spend time on instead.
- cyanydeez 4y agoGamblers always have leverage and your attitude ignores the systemic risk when these gamblers leverage themselves 30x chasing capital for billionaires?
- eftychis 4y agoGiven the terms -- funds are retained contingent on a deal and confirmation of the deal -- I wouldn't call that a gamble. Gamble would be keeping the stock after the fact or buying it post formation -- if it was a "less valuable company." Also I think at some point we need to reconsider the bail out approach of lending companies because they are too big to fail. Also separating institutions and trimming through their lending money practices makes better sense than bailing them out, because "too big too fail." When I borrow money I am assigned an interest plus collateral rate based on the inflation/cost of money at the time+projected and my risk of defaulting. On average the "bank" has zero risk (and I have liquidity). If the bank gets greedy and like some institutions that we are all well aware of in the recent years, forgets to do basic risk planning and hedge appropriately flounders that, then if most people default it is their fault -- people paid them for that event. Start bankruptcy proceedings, liquidate/fire the executive team, absorb valuable teams/assets, renegotiate with company's lenders and move on. This happens constantly B2B. Business bankruptcy is different than individual one (at least in the U.S. and some other E.U. countries I am familiar with) -- due to liability plus other measures. Somehow politicians came into the story of systemic risk and allowed certain parts of the economy to become immune to such issues... (Which lead to the Wall Street/Big Bank cockiness.)
- t-3 4y agoIf the system faces risk because it can't tell a good borrower from a gambler, it deserves to fail. The corpses of those lacking good judgement will serve double duty as object lesson and food for a new generation.
- ac29 4y agoAfter IPO, large index funds are picking up these de-SPAC companies. So, I think its not just "greedy gamblers" who are exposed to losses - conservatively invested retirees are taking losses too.
- stickfigure 4y agoWhat large index funds, what companies? Do you have any examples?
- yareally 4y agoThe Russell 2000 (IWM). Pretty big index. https://finance.yahoo.com/quote/IWM/holdings/ https://finance.yahoo.com/quote/IWM/holdings/
- rajup 4y agoIf it's a pretty big index it's unlikely a company going bust here or there is a big deal.
- stickfigure 4y agoThat's half the answer but still not enough information. What de-SPAC companies are part of that index? What percentage of the index do they represent?
- ac29 4y agoVTI (Vanguard's Total US Market) owns SPCE, CLOV, and SOFI (the only three I looked up). All three currently trade below IPO price.
- systemvoltage 4y agoThen let’s change the way these funds built their portfolios. More regulation isn’t the right answer.
- mccorrinall 4y agoUh, then they shouldn’t pick up squoze stocks like AMC and GME either? I don’t agree.