7 ms·

Bill Ackman to wind down SPAC, return $4B to investors

81 points by prostoalex 4y ago

JohnJamesRambo 4y ago
https://news.crunchbase.com/business/terrible-spac-performers-stock-drop-lmnd/ https://news.crunchbase.com/business/terrible-spac-performer... “For SPAC investors, however, the good news is there is only a limited distance left to fall. If you’re trading at $2 for instance, at least there’s only $2 left to conceivably lose.” The SPAC scene in a nutshell haha.
- vagab0nd 4y ago
  Are they serious? This reminds me of "it's already down 90%, only 10% left to drop". But it doesn't sound like they are joking in the article.
  - smabie 4y ago
    Turns out that even if you're down 90% you can still go down another 100%.
  - JohnJamesRambo 4y ago
    It’s a Poe’s Law moment for sure. But I get that a lot reading things like Crunchbase and Motley Fool.
zrobotics 4y ago
This reminds me so much of the ICO bubble. It just seems like fancy ways of dancing around SEC regulations. At least the ICO folks were honest about avoiding regulations, a SPAC seems like it is very transparently saying "we want to have a public company for the sole purpose of acquiring a private company that can't pass SEC scrutiny". It's a "saying the quiet part out loud" thing.
- mschuster91 4y ago
  The concept is nothing new, at least for Germany - we have long established two different variants of "shelf corporations" for the purpose of taking a short circuit to usual regulations: one that is explicitly created as a blank slate for a buyer to buy, usurp and use to be traded publicly ("Vorratsgesellschaft"), and the other one being a company that has been wound down but not formally dissolved ("Mantelgesellschaft"). The former is (or was, until Brexit) especially popular with British Ltd.-style companies because these were easier to set up than a German GmbH/AG. Something like a SPAC is new as a concept, but in the same legal vein - the only difference is which side brings the capital. In the classic cases, the "acquired" company brings the capital, in a SPAC the acquiring company - but (at least here) it is of no matter legally.
- yreg 4y ago
  Doing a traditional IPO is a slow process that can preoccupy the company and set it back for a year or more. For some growth companies it is a rational and legitimate choice to go public through a SPAC.
  - jjeaff 4y ago
    Ya, and paying your taxes can be a long and arduous process too. That doesn't mean it's ok to just skip all the hard work. Going public is not difficult "just because". It's difficult because there are a lot of reporting and due diligence and research and compliance required before your company is opened up to the public market for investment. It's there to keep garbage companies like Truth Social from going public and bilking unsophisticated investors of their money. It seems to me that a spac is just a technically legal way to get around the spirit of the law.
    - yreg 4y ago
      I didn't say it's ok to do _because_ traditional IPO is troublesome. It is ok to do because it is ok to do according to the regulators. What I said is that there are legitimate reasons to use a SPAC vehicle, reasons other than pulling a scam on the investors.
lordnacho 4y ago
It's an opportunistic play that didn't find an opportunity. Pretty reasonable to return the money. Ackman still has a reputation to protect, so he needed to look for some sort of reasonable deal with good flippability (that's the Latin term). That's gone now with all the air deflating from the SPAC market. A SPAC play would not likely be the kind of thing he'd buy and hold for ages, especially as everyone knows there's some serious adverse selection going on concerning which firms will go for a SPAC. There's a fair chance his sales guys are able to simply move the investors over into his main fund or some similar vehicle, so it's not actually such a big deal for him financially. Plus you get kudos for not doing something that might be seen as reckless or profiteering.
- mikebos 4y ago
  I have a somewhat different opinion. He found a target, failed to meet SEC regulations with the negotiated deal and took the deal for his main fund. After that he basically threw the towel on the spac. This happened approx a year ago. Not finding a good deal is understandable, finding a deal and messing it up not so much. With his army of lawyers this looks from the outside more an deliberate strategy then a honest mistake. Edit: link https://www.bloomberg.com/news/articles/2021-07-19/pershing-square-decides-not-to-proceed-with-universal-music-deal https://www.bloomberg.com/news/articles/2021-07-19/pershing-...
saos 4y ago
Dabbled in SPACs since 2019. Glad I got out when it peaked.
gregwebs 4y ago
Best performing SPAC of the year if investors are getting all their money back.
- abduhl 4y ago
  Are they? Most likely bought in at an overhyped valuation of over $20 and are now only receiving $20 back.
  - SkyMarshal 4y ago
    How would they have lost money, other than management fees, if none of it was invested?
    - abakker 4y ago
      Opportunity cost - you locked up your money and it lost value due to inflation instead of being put into something that kept pace with inflation. Obviously, this is counterfactual, but that is the premise.
      - giantg2 4y ago
        The flip side is that statistically one would have likely put it in a security that declined over the past year.
    - missedthecue 4y ago
      You bought shares on the secondary market above the listing price. You are only receiving money at the listing price. i.e.: 1. shares listed at $20, I buy one, paying Ackman $20 2. I sell it to you for $30, you pay me that money 3. Ackman returns $20 to you It also works the other way around if you bought it from me below $20. You'd make a profit.
  - enlyth 4y ago
    Still not as terrible as some SPACs, the all time high was around $30 for PSTH, so the worst haircut you could get is to be 33% down if you had bought at the very exact top.
bsenftner 4y ago
What a lack of imagination, "can't find a suitable investment".
- cosgrove 4y ago
  Note that they mentioned the investment must be executable as well. Straightforward to find something to buy, but might be hard to convince the owners to sell.
tqkxzugoaupvwqr 4y ago
I’m down 15% (don’t ask). When is the right time to sell?
- deleted 4y ago
  [deleted]
- UkrainianJew 4y ago
  The best time was at the peak. The second best time is now (*) * - not an investment advice.
emehex 4y ago
I was somewhat interested in PSTH when UMG was the target. Shame BA used PSCM instead of PSTH to buy the 10% stake from Vivendi...
wafriedemann 4y ago
SPACS were just a new solution to an old problem: Dumping overpriced assets to small investors. I've seen it all through my dad's investments, which local banks sold him. Younger people don't fall for that trick anymore, so et voila, SPACs are born. Same shit, new name. There was an article just a few weeks ago in the FT, that showed how PE firms are pumping up company prices by buying companies they already own. At the end this garbage needs to be dumped on someone, otherwise why bother.

81 points by prostoalex 4y ago

https://news.crunchbase.com/business/terrible-spac-performers-stock-drop-lmnd/ https://news.crunchbase.com/business/terrible-spac-performer... “For SPAC investors, however, the good news is there is only a limited distance left to fall. If you’re trading at $2 for instance, at least there’s only $2 left to conceivably lose.” The SPAC scene in a nutshell haha.

vagab0nd 4y ago
Are they serious? This reminds me of "it's already down 90%, only 10% left to drop". But it doesn't sound like they are joking in the article.
- smabie 4y ago
  Turns out that even if you're down 90% you can still go down another 100%.
- JohnJamesRambo 4y ago
  It’s a Poe’s Law moment for sure. But I get that a lot reading things like Crunchbase and Motley Fool.

zrobotics 4y ago

This reminds me so much of the ICO bubble. It just seems like fancy ways of dancing around SEC regulations. At least the ICO folks were honest about avoiding regulations, a SPAC seems like it is very transparently saying "we want to have a public company for the sole purpose of acquiring a private company that can't pass SEC scrutiny". It's a "saying the quiet part out loud" thing.

mschuster91 4y ago
The concept is nothing new, at least for Germany - we have long established two different variants of "shelf corporations" for the purpose of taking a short circuit to usual regulations: one that is explicitly created as a blank slate for a buyer to buy, usurp and use to be traded publicly ("Vorratsgesellschaft"), and the other one being a company that has been wound down but not formally dissolved ("Mantelgesellschaft"). The former is (or was, until Brexit) especially popular with British Ltd.-style companies because these were easier to set up than a German GmbH/AG. Something like a SPAC is new as a concept, but in the same legal vein - the only difference is which side brings the capital. In the classic cases, the "acquired" company brings the capital, in a SPAC the acquiring company - but (at least here) it is of no matter legally.
yreg 4y ago
Doing a traditional IPO is a slow process that can preoccupy the company and set it back for a year or more. For some growth companies it is a rational and legitimate choice to go public through a SPAC.
- jjeaff 4y ago
  Ya, and paying your taxes can be a long and arduous process too. That doesn't mean it's ok to just skip all the hard work. Going public is not difficult "just because". It's difficult because there are a lot of reporting and due diligence and research and compliance required before your company is opened up to the public market for investment. It's there to keep garbage companies like Truth Social from going public and bilking unsophisticated investors of their money. It seems to me that a spac is just a technically legal way to get around the spirit of the law.
  - yreg 4y ago
    I didn't say it's ok to do _because_ traditional IPO is troublesome. It is ok to do because it is ok to do according to the regulators. What I said is that there are legitimate reasons to use a SPAC vehicle, reasons other than pulling a scam on the investors.

lordnacho 4y ago

It's an opportunistic play that didn't find an opportunity. Pretty reasonable to return the money. Ackman still has a reputation to protect, so he needed to look for some sort of reasonable deal with good flippability (that's the Latin term). That's gone now with all the air deflating from the SPAC market. A SPAC play would not likely be the kind of thing he'd buy and hold for ages, especially as everyone knows there's some serious adverse selection going on concerning which firms will go for a SPAC. There's a fair chance his sales guys are able to simply move the investors over into his main fund or some similar vehicle, so it's not actually such a big deal for him financially. Plus you get kudos for not doing something that might be seen as reckless or profiteering.

mikebos 4y ago
I have a somewhat different opinion. He found a target, failed to meet SEC regulations with the negotiated deal and took the deal for his main fund. After that he basically threw the towel on the spac. This happened approx a year ago. Not finding a good deal is understandable, finding a deal and messing it up not so much. With his army of lawyers this looks from the outside more an deliberate strategy then a honest mistake. Edit: link https://www.bloomberg.com/news/articles/2021-07-19/pershing-square-decides-not-to-proceed-with-universal-music-deal https://www.bloomberg.com/news/articles/2021-07-19/pershing-...

saos 4y ago

Dabbled in SPACs since 2019. Glad I got out when it peaked.

gregwebs 4y ago

Best performing SPAC of the year if investors are getting all their money back.

abduhl 4y ago
Are they? Most likely bought in at an overhyped valuation of over $20 and are now only receiving $20 back.
- SkyMarshal 4y ago
  How would they have lost money, other than management fees, if none of it was invested?
  - abakker 4y ago
    Opportunity cost - you locked up your money and it lost value due to inflation instead of being put into something that kept pace with inflation. Obviously, this is counterfactual, but that is the premise.
    - giantg2 4y ago
      The flip side is that statistically one would have likely put it in a security that declined over the past year.
  - missedthecue 4y ago
    You bought shares on the secondary market above the listing price. You are only receiving money at the listing price. i.e.: 1. shares listed at $20, I buy one, paying Ackman $20 2. I sell it to you for $30, you pay me that money 3. Ackman returns $20 to you It also works the other way around if you bought it from me below $20. You'd make a profit.
- enlyth 4y ago
  Still not as terrible as some SPACs, the all time high was around $30 for PSTH, so the worst haircut you could get is to be 33% down if you had bought at the very exact top.

bsenftner 4y ago

What a lack of imagination, "can't find a suitable investment".

cosgrove 4y ago
Note that they mentioned the investment must be executable as well. Straightforward to find something to buy, but might be hard to convince the owners to sell.

tqkxzugoaupvwqr 4y ago

I’m down 15% (don’t ask). When is the right time to sell?

deleted 4y ago
[deleted]
UkrainianJew 4y ago
The best time was at the peak. The second best time is now (*) * - not an investment advice.

emehex 4y ago

I was somewhat interested in PSTH when UMG was the target. Shame BA used PSCM instead of PSTH to buy the 10% stake from Vivendi...

wafriedemann 4y ago

SPACS were just a new solution to an old problem: Dumping overpriced assets to small investors. I've seen it all through my dad's investments, which local banks sold him. Younger people don't fall for that trick anymore, so et voila, SPACs are born. Same shit, new name. There was an article just a few weeks ago in the FT, that showed how PE firms are pumping up company prices by buying companies they already own. At the end this garbage needs to be dumped on someone, otherwise why bother.