2 ms·
The incentives are misaligned with SPACs. If I gave you $1 billion and said: 1. buy a company within 2 years and keep 20% of the equity of that company for yo
by throwaway_1928 4y ago
The incentives are misaligned with SPACs.
If I gave you $1 billion and said:
1. buy a company within 2 years and keep 20% of the equity of that company for yourself. You do not need to hold that equity for the long term. You can sell that 20% equity immediately and pocket the proceeds.
2. do not buy a company within 2 years and return the $1 billion to me with interest.
If you had to choose between buying a trashy company and pocketing $200 million or returning me the $1 billion and pocketing nothing, which would you choose?
- donavanm 4y agoAlso in case 1, of a sale, you can issue additional warrants to “friends” and key “investors” as an incentive. Which further dilutes the actual post merger equity pool that everyone is buying in to. SPACs are free money for early investors at the cost of everyone else whos too small to get sweetheart terms or actually sticks with the equities.
- pbreit 4y agoSo, the latter?