[HN Gopher] Could giant SPACs be next?
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Could giant SPACs be next?
Author : Iwontgo
Score : 37 points
Date : 2021-01-23 10:23 UTC (1 days ago)
(HTM) web link (techcrunch.com)
(TXT) w3m dump (techcrunch.com)
| sitkack wrote:
| Could someone ELI 15?
| totalZero wrote:
| Sure. What part?
|
| SPACs are basically stocks in search of a company. People put
| their resources together, and then eventually the guy who runs
| the SPAC finds a great company to invest in, and uses the SPAC
| to buy it.
|
| Nowadays, some companies are using SPACs to go public instead
| of using an IPO. In some ways it's like the work-from-home
| version of an IPO; the investors are already subscribed, and
| the stock is already public.
|
| So far, we have seen small companies get acquired by SPACs.
| However, there are many private and established companies out
| there. The article asks whether any of those much larger
| companies are going to become SPAC targets.
| sitkack wrote:
| Thanks that really helped. Seems less shady than IPO via a
| reverse merger with an OTC stock.
| sgpl wrote:
| I'm pretty bearish on SPACs tbh. Not in the immediate future but
| 2-3 years out (most of 2021 will be spent on vaccines so I'm sure
| there will be more stimulus added to the economy).
|
| It's just bonkers that there's so many companies that you can
| take public with this mechanism without more than a handful being
| duds so it just seems like market participants who are able to
| launch SPACs are doing so to take advantage of the mkt conditions
| to cash out. Also, there are no incentives to keep the SPAC
| promoters as long term shareholders so they really don't have any
| reason to not dump their shares after a little bit of time unless
| they see that these companies will have sustained growth. So to
| me (with a few exceptions) this seems like a massive pump and
| dump scheme but with more sophisticated players.
|
| I had initially assumed that there was only a little bit of extra
| cash floating around in the US on the account of the two stimulus
| bills passed but I recently read in an article on Bloomberg that
| the US Govt/Fed bought something in the neighbourhood of $5
| TRILLION worth of corporate bonds in 2020 alone to keep the mkts
| from freezing, etc. And that number that really seemed absolutely
| unreal to me. Out of that, a lot of it went to companies (esp.
| those controlled by Private Equity) to pay dividends to their
| owners. Lots of share repurchases as well I'm sure. So lots of
| cash floating around with investors for SPACs to keep chugging
| along till the US keeps adding more money to the mkts.
| jtseun wrote:
| I heard someone say "Pre-LOI SPACS are loot boxes for
| investors".
|
| While they may come off as a pump & dump, all SPACs have a
| floor of hard cash placing them around $10; notably Ackman's
| PTSH is $20. Looking at IPOE popping 20% off Chamath's tweets,
| it does feel like some variant of musical chairs.
| creeble wrote:
| What's the difference between a SPAC and what used to be called a
| "reverse merger"?
|
| I.e., when a smaller (but publicly traded) company, merges with a
| larger private company.
|
| These used to be pretty common scammy ways to generate capital,
| usually through pump and dumps.
|
| Same thing, just new acronym?
| np_tedious wrote:
| My understanding is that a SPAC is more or less a
| corporation/fund that exists solely for the aim of doing a (or
| multiple?) reverse merger
| the_mitsuhiko wrote:
| > What's the difference between a SPAC and what used to be
| called a "reverse merger"?
|
| A SPAC is created for the designated purpose to become a
| vehicle to take another company public. In a traditional
| reverse merger situation both companies are engaged in some
| regular business activity.
| Judgmentality wrote:
| You make a SPAC sound even shadier than a reverse merger.
| emteycz wrote:
| To me it sounds like all cards are on the table, as opposed
| to reverse mergers.
| nibsfive wrote:
| It's more an indication of how (irrationally) intent
| companies are on staying private well into their days as a
| global empire.
| toomuchtodo wrote:
| Why is it irrational to stay private? Going public
| constrains you with oversight and public shareholder
| demands.
|
| If you can get access to capital without public
| shareholders, you absolutely should.
| [deleted]
| legym wrote:
| Been trading SPAC's recently. Seeing a huge influx of SPACs in
| renewable energy. Jump in at the beginning and the most you can
| lost is 10$ if the SPAC fails. When it receives a letter of
| intent(LOI) you'll see a big boost to the stock price. When the
| definitive agreement (DA) is announce there is another 20% jump.
| After the merge and symbol change, the price drops and then
| slowly comes up.
|
| With so many coming out, just keep jumping to new SPACS as the
| LOI or DA is announced. Just wanted to share my experiences.
|
| EDIT: Nikola and QuantumScape (NKLA/QS) are the big ones that got
| attention. Every SPAC is hoping to make a run like QS; 10$ went
| all the way up to 100$ at one point. NKLA was a scam, but brought
| a lot of attention
| cyral wrote:
| What's the best way to monitor for new SPACs and when those
| events happen?
| legym wrote:
| I've been following other boards, but saw this website
| floating around. Many of them have active excel sheets
| monitoring which ones have announced
|
| https://spactrack.net
| silexia wrote:
| A SPAC has no actual competitive edge in the market. They
| are literally all hype. As long as the stock market goes
| up, you probably will make money. But be very careful as if
| the market turns down, I think these will turn out to be
| worthless.
| totalZero wrote:
| To take the other side of this perspective:
|
| The edge is twofold. First, it's a way to pool funding
| using an exchange rather than getting some bank to
| underwrite an IPO. Second, many of the people who run
| SPACs are famous investors who have a track record of
| success and have greater information and access than most
| investors.
| stewbrew wrote:
| I think this is a rather oversimplified view of SPACs. Matt
| Levine recently wrote a nice piece about the magic of SPACs.
| Here is a paper he cites:
| https://corpgov.law.harvard.edu/2020/11/19/a-sober-look-at-s...
| gundmc wrote:
| What's driving the recent popularity explosion of SPACs? They've
| been around since at least the early 2000s, but total capital
| participating has risen nearly tenfold since 2014.
| dmurray wrote:
| From the company's side, there is a willingness to explore non-
| traditional methods of going public (see also: direct listings,
| or not going public at all). I would say this has been driven
| directly by a perception that companies leave money on the
| table in traditional IPOs, and indirectly by the rise of the
| "disruptor" mindset led by tech companies where CEOs are more
| willing to challenge the status quo.
|
| From the investors' side, SPACs are popular because they've
| been really successful! I don't have stats on this but just
| buying SPACs surely outperformed any index in the last 5 years.
| You'd expect this effect to disappear as they get more popular,
| but it's worth noting that blindly buying IPOs has also been a
| really good investment strategy - enough first-day pops of 50%
| or 100% to outweigh the duds - though less accessible to small
| investors.
| hakfoo wrote:
| I'd suspect there's two different flows towards "non-
| traditional" listings.
|
| There's the firms with clear market appeal who think they're
| getting underpriced by a conventional IPO model, but I
| suspect there's also firms who just want to bust onto the
| market and sidestep the normal disclosure and research cycle.
| Judgmentality wrote:
| Speculative opinion - lack of regulations are increasingly
| appealing in an ever frothier market.
| jcomis wrote:
| basically they became much more accessible to regular people,
| and thus much more exposed to the pump+dump cycle and
| hucksters. I'm not saying SPACs are bad, but I think that is
| what is driving the recent craze. The number of wildly
| speculative and clear astroturf threads on reddit about PSTH or
| CCIV and others is crazy.
| neom wrote:
| In additional to what others have said, If you have access to
| some private "non-traditional capital", say a family office or
| PE, and they're interested in investing in or buying your
| company, and you'd like to stay somewhat autonomous but still
| take their money, a spac is an interesting vehicle.
| sixothree wrote:
| How do you pronounce SPAC?
| babelfish wrote:
| Exactly how it looks - "Spack"
| hkt wrote:
| Unfortunately, in the UK this is a deeply hateful term for
| disabled people. Actual hate speech if you couple it with
| violence etc.
|
| What's the old saying? Two cultures divided by a common
| language..
| babelfish wrote:
| Wow, I had no idea - thanks for the heads up
| jfk13 wrote:
| Interesting -- as a UK native, I don't recognise that.
| Maybe it's limited to certain regions/subcultures/???
| chris_j wrote:
| The word was definitely used (and was understood to be
| offensive) when I was growing up - in Worcestershire in
| the 90s. I wonder if it's fallen out of use since then.
| missedthecue wrote:
| Wow never heard of this and I lived in the UK for an
| extended period of time. Thanks for the info.
| sdflhasjd wrote:
| I came across "spack"[1], another unfortunately named repo
| recently as well.
|
| Another good one is "nonce" - seen frequently in oauth and
| crypto - always gets a laugh out of the juniors.
|
| [1] https://github.com/spack/spack
| idlemind wrote:
| It's not in particularly common usage anymore though, if at
| all.
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