[HN Gopher] Goldman Sachs shrinking its SPAC business amid regul...
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Goldman Sachs shrinking its SPAC business amid regulatory crackdown
Author : prostoalex
Score : 120 points
Date : 2022-05-10 15:37 UTC (7 hours ago)
(HTM) web link (www.cnbc.com)
(TXT) w3m dump (www.cnbc.com)
| PedroBatista wrote:
| Looks like Goldman Sachs got a call telling them the SEC police
| was coming and got out of the party in a hurry ( and what a party
| it has been.. )
|
| Only retail investors ( aka suckers ) will be holding the
| bag/beer, as always.
|
| I'm curious to know if Goldman Sachs already has an alternative
| scheme/scam running or it's a case of "chilling out for awhile".
| MomoXenosaga wrote:
| Has anyone from Goldman ever actually been in trouble from the
| authorities?
|
| That was my take from the 2008 financial crisis: the government
| had to fix everything. Again. And no Hollywood movie about the
| European, American and Asian finance ministers who had to make
| sure the ATMs kept working.
| FabHK wrote:
| Fabrice "Fabulous Fab" Tourre was basically Goldman's fall
| guy. Reasonably junior (in investment banking, VP is junior -
| analyst, associate, VP, director, MD) who had sent some
| stupid emails to his girlfriend ("The whole building is about
| to collapse anytime now. Only potential survivor, the
| fabulous Fab ... standing in the middle of all these complex,
| highly leveraged, exotic trades he created without
| necessarily understanding all of the implications of those
| monstruosities!!!").
|
| He was charged, but nobody else from GS, AFAIK.
|
| https://www.usatoday.com/story/money/business/2013/08/01/gol.
| ..
|
| (I remember because he besmirched my good name :-)
| odiroot wrote:
| Yes Tim Leissner but nothing related to 2008: https://en.wiki
| pedia.org/wiki/1Malaysia_Development_Berhad_s...
| rchaud wrote:
| Roger Ng was found guilty by a US court of conspiring to loot
| Malaysia's 1MDB fund:
|
| https://www.npr.org/2022/04/08/1091801453/1mdb-fund-
| goldman-...
| hackernewds wrote:
| One need only look at the nickel commodities market to
| understand that Goldman socks measures these things in terms
| of expected value, where if the benefit exceeds the EXPECTED
| VALUE (probability*fine) of the fines, they will have an
| active desk for it.
|
| https://www.cftc.gov/PressRoom/PressReleases/7505-16
| pavlov wrote:
| There's always crypto...
|
| However the SEC recently increased its "Crypto Assets and Cyber
| Unit" staff from 30 to 50. Hopefully they'll bring the hammer
| down on token offerings with enough force to scare the big VCs
| away, at least.
| gowld wrote:
| 50people vs $billions in scams.
| rchaud wrote:
| You never know, those 50 people could have 50 discord
| channels cultivating an amazing community (of informants).
| aussiegreenie wrote:
| Goldman will be on the 'other side', that is, shorting the
| existing SPAC companies knowing that theu are overpriced.
| chrisgd wrote:
| The SEC has been saying for months they were taking a harder
| look here. Just reading the writing on the wall. All the
| companies that have gone public via SPAC have not done well,
| not sure who would go public that way - I imagine no one will
| be holding the bag because most will give the money back and go
| away
| rchaud wrote:
| If you have your ducks in a row as a business, you don't have
| to go public via SPAC.
| atlasunshrugged wrote:
| I'll admit I have some recency bias here as I just re-read The
| Big Short about the '08 financial crash but I think you're
| probably right on the first point, they got a tip or heard
| around the proverbial finance industry watercooler that a
| crackdown was coming and decided to exit. I'm 100% certain
| they've got something else in the works, probably more opaque
| for regulators and the public with less risk to Goldman and a
| higher profit margin if history is to be believed.
| chowells wrote:
| It's not a big secret that the SEC doesn't like SPACs. They
| make these things really clear before they start taking
| action. They specifically have an issue with the fact that
| the prospectus for a de-SPAC merger isn't (yet) subject to
| all the same reporting rules as an S-1 filing.
|
| When companies have to present their financials coldly
| instead of painting the nice warm dream, it's gonna deflate
| the market. Between that and the other factors hitting the
| market now (interest rates and inflation), there just isn't
| going to be a huge amount of work in the space in the future.
|
| You really don't need to assume a conspiracy of some sort is
| involved when all the completely public factors justify this.
| jessaustin wrote:
| This not-big secret is also a not-new secret. These aspects
| of SPACs have been apparent since the invention of SPACs.
| What completely public factor accounts for the change in
| Goldman's policy ?
|
| You really don't have to cape up for Goldman. They don't
| care what we think. They always have enough alumni in the
| government that they don't _have_ to care. [0] The Biden
| administration is theoretically less infested with them
| than previous ones, but e.g. SEC Chair Gary Gensler and
| Examiner Adam Storch are both former Goldman people. There
| are probably more but I figured one minute on DDG was
| enough...
|
| [0] https://www.nytimes.com/2017/03/16/business/dealbook/go
| ldman...
| chowells wrote:
| Why is it so important to you that a conspiracy must
| exist? What pushed you to ignore evidence so hard that
| you appear to think that a question I'd already answered
| is some giant gotcha? (What's different now? The market
| has cooled massively for other reasons.)
|
| If you look at the new rules the SEC announced, they're
| so poorly written that no bank would see them as more
| than an accounting checkbox. Those rules are certainly
| not the reason for winding down a line of business.
|
| If you want to attack connections between finance and the
| government, why not focus on real ones? Like, why are the
| new SEC policies so toothless? Who wrote them, and why?
|
| It could easily be someone from GS, even! But people are
| a lot more likely to listen to you if you save your
| criticism for things that are based on facts and clear
| reasoning. A massive web of innuendo is worth a lot less
| than one direct problem.
| Adraghast wrote:
| That tip would be the nearly 400 pages of proposed
| regulations the SEC dropped in March:
|
| https://www.sec.gov/rules/proposed/2022/33-11048.pdf
| mqus wrote:
| TIL: SPAC - Special-Purpose Acquisition Company ->
| https://en.wikipedia.org/wiki/Special-purpose_acquisition_co...
| 3np wrote:
| Thanks. Thought it was short for Super PAC
| (https://www.fec.gov/help-candidates-and-committees/filing-
| pa...) first and found the whole thing confounding.
| eatonphil wrote:
| I recommend following Matt Levine's free Money Stuff column if
| you're into this.
|
| https://www.bloomberg.com/opinion/authors/ARbTQlRLRjE/matthe...
| FabHK wrote:
| Seconded. Matt Levine's column is informed, informative,
| witty, and entertaining.
| bozhark wrote:
| I recommend not.
| CyanBird wrote:
| If you don't then you might have a better source for
| reviewing the day to day of the banking/finance landscape?
| calmoo wrote:
| Why not?
| xoz wrote:
| Matt Levine, much like most journalists, does not create
| any of the content, he just writes about it. E.g.
| etcetera the stories he tells are usually of 3rd parties
| (like what's happening in financial markets).
|
| Would be much more interesting if he had personally
| experienced or orchestrated what he discusses. Otherwise
| you may as well just listen to anyone.
|
| EDIT: As some people are responding and confused about
| how journalism works: E.g. he wrote about Elon Musk today
| yet is just getting his information from other articles
| or Twitter as I doubt he is speaking with Elon Musk or
| involved in the deal. At that point it's just hearsay.
| chowells wrote:
| > Would be much more interesting if he had personally
| experienced or orchestrated what he discusses.
|
| Like if he had worked at Goldman-Sachs and had direct
| experience with how large financial institutions function
| or something?
| xoz wrote:
| In the past, yes, but I mean what he writes about now.
| E.g. he wrote about Elon Musk today yet is just getting
| his information from other articles or Twitter. At that
| point it's just hearsay.
| bumby wrote:
| So say a science writer reviews peer-reviewed literature
| to write about some technology or technological claim
| (let's say CRISPR) but has done none of that direct
| research themselves...are you saying they are just
| writing hearsay?
|
| Now maybe you can qualm about where he gets his
| information and how reputable it is, but I think your
| standard for journalism differs from most.
| JumpCrisscross wrote:
| > _it 's just hearsay_
|
| He has been offering analysis and commentary on the
| process since the beginning, floating theories for
| various parties' positions and debunking silly ideas that
| were being taken seriously at the time.
| alpha_squared wrote:
| That's not a prerequisite to journalism, though I guess
| that can be _your_ standard for it. Musk is notoriously
| media-hostile, which means it 's often very difficult to
| get direct quotes or responses from him on a story that
| doesn't try to flatter him. By your standard, that'd mean
| Musk has unilateral ability to discredit journalism by
| just not participating.
| newsclues wrote:
| Do you have any personal experience in this, or are you
| just anyone writing rubbish?
| mywittyname wrote:
| No offense, but this is silly. The whole purpose of
| journalism is to report what is happening to other
| people.
|
| Writing about your first hand accounts is not journalism.
| If for no other reason than it would be inherently
| biased. We have a term for stories from a person's life
| written by the person: autobiographies.
| eropple wrote:
| The BBC puts someone on the ground in Kyiv while it's
| being shelled. They write about what they see and learn
| while there--and you don't think that's journalism?
|
| To be clear, the criticism of Levine from the GP is total
| bunk, but this definition is weird.
| gowld wrote:
| Huh? writing about someone you see is journalism.
| roflyear wrote:
| Gonzo journalism maybe
| colinmhayes wrote:
| Well good thing he's not a journalist. He writes a
| comedic opinion column that pulls from his experience as
| an investment banker and M&A lawyer. He's a blogger.
| rpgbr wrote:
| > Matt Levine, much like most journalists, does not
| create any of the content, he just writes about it.
|
| You just literally described a journalist's job.
| Congrats?
| bonecrusher2102 wrote:
| Here's the best source I've ever read explaining the SPAC model
| and it's pitfalls.
| https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3720919
|
| And the discussion on HN:
| https://news.ycombinator.com/item?id=26037059
| spxdcz wrote:
| Related: I wrote some code that attempts to extract the latest
| SPAC data (which you can filter/export) from SEC filings as
| they're filed: https://docoh.com/spacs
| SheinhardtWigCo wrote:
| John Tuld: Let me tell you something, Mr. Sullivan. Do you care
| to know why I'm in this chair with you all? I mean, why I earn
| the big bucks.
|
| Peter Sullivan: Yes.
|
| John Tuld: I'm here for one reason and one reason alone. I'm here
| to guess what the music might do a week, a month, a year from
| now. That's it. Nothing more. And standing here tonight, I'm
| afraid that I don't hear - a - thing. Just... silence.
|
| https://youtube.com/watch?v=K05sxfa4zdM
| toomuchtodo wrote:
| Both a great lens into part of the GFC and a spectacular
| cinematic piece. Tremendous scene.
| HWR_14 wrote:
| The part that bothered me is that, as I recall, there was no
| actual margin call in the movie. I guess it all was done in
| advance of a margin call? I don't recall exactly.
|
| Great movie though
| awad wrote:
| The plot centers around the possibility of going bankrupt
| given the high amount of leverage being used on volatile
| mortgage securities that were starting to fail IIRC. The
| scheme they cook up to offload their as much of their
| position as possible the next morning.
| wozer wrote:
| Do large institutional investors even get margin calls? I
| thought this only happens to customers of brokers.
| SkipperCat wrote:
| It pretty much happened to Knight Trading. They turned on
| a dev trading algo and wound up acquiring a massive
| amount of positions (and thus risk). Their clearing firm
| forced them to close all those positions and the cost of
| crossing the bid-ask spread wiped them out.
|
| Never read the book
| (http://www.knightmareonwallstreet.com/) but watched it
| happen in real time from the trade desk at a different
| firm.
|
| You could also say it happens to small banks. If you fail
| some sort of FDIC testing, you're classified as at-risk
| and they force you to sell to a larger bank so as not to
| risk depositor funds.
| gowld wrote:
| Anyone who borrows a lot and has unrealized losses can
| get margin called.
| chollida1 wrote:
| https://www.bnnbloomberg.ca/goldman-u-turn-on-hwang-put-
| bank...
|
| You bet they do. But like all things the more money you
| have the better you get treated.
|
| Small retail investor, your margin call is likely
| automatic with assets sold without your input to take the
| money.
|
| large hedge fund. Tables of lawyers deciding how much you
| have to put up, at what time, and what can you move out
| of that bank before you pay.
| SkipperCat wrote:
| By dumping all their portfolio, they avoided the margin
| call which would have destroyed the company. Their early
| and bold actions saved the firm. Sadly for the folks on the
| other end of the trades, it probably crushed them.
|
| Margin call is by far the best movie about the financial
| crisis of 2008 that I've ever seen. I was working in the
| biz at that time and it all just rang so true. 7 AM pre-
| market meetings, lots of folks crunching data, Wall Street
| people actually living in Brooklyn and so much more.
|
| Sadly, the movie is so esoteric that it never had a
| mainstream success. Such a shame because it had great
| actors and a fantastic script.
| ericmay wrote:
| I agree. Margin Call and The Big Short (the book is sooo good
| even if you've seen the movie!) are the best two movies that
| came out of that entire debacle. That scene was enjoyable.
| They really nailed the casting and conversations.
| jstx1 wrote:
| Yes, the person who was just briefed on what was happening, and
| in very simple terms because he doesn't understand the
| technical language of complex financial instruments - that's
| the person who's guessing what "the music" is going to do?
|
| That whole movie is so shallow when you think about it for more
| than 2 seconds.
| dilyevsky wrote:
| I think you're assuming a little too much about what Irons
| character does/doesn't know about the overall state of
| financial system. He may had other analysts/industry insiders
| briefing him on various things for months by that point.
| jstx1 wrote:
| > He may had other analysts/industry insiders briefing him
| on various things for months by that point.
|
| That's you assuming stuff, not me. And I don't think
| there's any evidence for it in the movie - it's portrayed
| as a surprise to everyone involved.
| dilyevsky wrote:
| I wasn't the one making the original claim bc sorkin
| didn't include 10 mins of exposition explaining the ceo's
| logic there which btw is completely irrelevant to the
| theme of this movie.
|
| Edit: actually wasn't Sorkin but whatever
| paxys wrote:
| You have to watch it a bit closer. He didn't ask for the
| problem to be explained in simple terms because he didn't
| understand what was going on. Instead he wanted to make sure
| his subordinates understood the problem and didn't try to
| hide their ignorance behind needless complexity. This is a
| strategy used by all of the most effective managers in the
| real world ("pretend that I'm stupid", "explain it to me like
| I'm five"). It was clear from the get go that he was the
| smartest person in the room in every scene he was in.
|
| The movie also makes clear multiple times that the only
| people who were surprised by what was going on were the
| little guys - risk analysts and middle management. People at
| the top got the news and were simply like "ok guess it's
| finally happening".
|
| If you ask around people who do this stuff for a living, all
| of them will tell you that out of the dozens of movies about
| the financial crisis, Margin Call was conceptually the
| closest one to how things actually work in the industry
| (obviously disregarding the Hollywood-esque dialog and
| characters).
| jstx1 wrote:
| The portrayal of that character didn't work for me. I just
| didn't find him plausible as a high-level finance
| executive. It's like a portrayal of a CEO for people who
| have never interacted with such a person in their life. If
| that character works for you, then it makes sense that you
| can interpret things in a more generous way.
| dilyevsky wrote:
| You haven't interacted with a lot of ceos outside of tech
| then. I'd say irons and especially bettany's low level
| desk director portrayals are exactly spot on. In some way
| toned down even
| paxys wrote:
| That's funny because he is literally based on two real
| people - Richard Fuld and John Thain (who were CEOs of
| Lehman Brothers and Merrill Lynch respectively at the
| time of the crisis).
| jessaustin wrote:
| I _thought_ the name "Tuld" might have had a meaning I
| was missing...
| shrimp_emoji wrote:
| I pray Jerusalem -- that the entire world -- can afford the...
| rarity... of a perfect knight.
| daniel-cussen wrote:
| What does that mean?
| evan_ wrote:
| It's a quote from the 2006 film "Kingdom of Heaven". I
| choose to interpret it as a comment on the pointlessness of
| posting a line of dialog from a movie as a response to an
| ongoing news story with no other commentary.
| chrisgd wrote:
| I think an even better quote for this situation is the one
| where the same character says "there are 3 ways to make money -
| be first, be smarter, or cheat. And the easiest is always to be
| first."
| joshocar wrote:
| I was literally just talking to a SPAC CEO last weekend that was
| in a deal with Goldman that got dropped by them. Apparently,
| there are regulations coming down from the SEC and Goldman didn't
| want to deal with them and/or the regulations changed the profit
| calculus.
| vmception wrote:
| Can someone explain Goldman's role? What are they underwriting?
| SPAC's merge with companies with capital that SPAC's already
| have collected. Was Goldman underwriting the formation of new
| SPACs when those SPACs are initially collecting money?
| JumpCrisscross wrote:
| > _Was Goldman underwriting the formation of new SPACs when
| those SPACs are initially collecting money?_
|
| SPACs are chock full of fees to Wall Street.
|
| When the SPAC goes public, it pays an IPO fee. The bank,
| having to comply with fewer regulations than in a traditional
| IPO, makes a healthy profit. When the SPAC negotiates a
| merger it pays M&A fees. When shareholders are presented with
| the merger and asked to vote _that_ comes with a fee. If
| there is a PIPE, there are, of course, more fees.
|
| Later, when the sponsors sell their stock, there will be
| brokerage fees for the block trade. And I assume, in the
| final stage of a SPAC's lifecycle, there will be de-listing,
| liquidation and/or distressed debt fees.
| darawk wrote:
| This suggests a new line of business for SPACs: SPAC SPACs.
| A SPAC who's only purpose is to acquire and then spin out
| new SPACs.
| exogenousdata wrote:
| Sadly too late. It's called a SPARC. Huzzah!
|
| https://www.forbes.com/sites/jacobwolinsky/2021/12/16/ode
| ys-...
| vmception wrote:
| could sell shares of the management company that the
| sponsors come from
| vmception wrote:
| > And I assume, in the final stage of a SPAC's lifecycle,
| there will be de-listing, liquidation and/or distressed
| debt fees.
|
| lol, are these target companies saddled with debt though? I
| don't think so
| BbzzbB wrote:
| Given the cash burn of the classic 2021 SPAC, if they're
| not riddled with debt yet they may well be as soon as the
| stock market ATM stops spitting money (which might be
| about now).
|
| Which reminds me OP omitted dilution/share issuance as a
| mechanism for banker fees.
| chrisgd wrote:
| Underwriting fees on SPACs are less than traditional IPO as
| it is easier to get done.
| JumpCrisscross wrote:
| > _Underwriting fees on SPACs are less than traditional
| IPO as it is easier to get done_
|
| True, but the margins are wider. Most of the documents
| are boiler plate. The same investors were buying them in
| comparable chunks from deal to deal. All this before the
| boatload of the other fees I mentioned.
| bradwood wrote:
| SPACs themselves need to float before they can make an
| acquisition. The investment bank provides the primary markets
| support for this, sets up a syndicate, and markets the spac
| to the institutional investor community.
|
| There may be a level of underwriting going on also, as is the
| case with a rights issue or IPO, but it's probably more the
| marketing and access to the bank's client base that the spac
| benefits from.
| matt_s wrote:
| I suspect that similar to how the "market" has various things
| "priced in", larger financial firms want to stay ahead of
| regulation and essentially change their business models around
| ahead of regulations.
|
| I think they all operate on the principle of being first for
| everything is more profitable, including exiting poor
| investments.
| ericmay wrote:
| The best way to think of "priced in" when you are reading
| something that someone else wrote is to replace those two
| words with "I don't know". Nothing is priced in. Everything
| is priced in. When someone thinks of an idea, by virtue of
| sharing that idea it's deemed to be "priced in".
| totoglazer wrote:
| No, that's kind of nonsense.
| ericmay wrote:
| It's really not. "It's priced in" is just religion at
| this point and it's really just surface level useless
| banter. The market is random and softly guided by
| macroeconomic forces. Interest rates go up and then the
| share price of Google goes up? Priced in. They go down
| and the share price goes up? Priced in. Company has a bad
| quarterly? Already pride in by the nefarious "market".
| Etc. Recognizing things like that is a good first step
| toward having a coherent investment thesis.
| aaaaaaaaata wrote:
| > Priced in
|
| By the time you are talking about, it largely will be.
| costcofries wrote:
| All I can think when I hear SPAC is Chamath and well, he should
| at this point be below everyones line.
| strikelaserclaw wrote:
| people should stop idolizing others just because they are
| wealthy, some of these guys are straight up gordon gekko type
| sociopaths
| tssva wrote:
| Unfortunately that is exactly why many people idolize them.
| paxys wrote:
| 1. Get lucky backing the right companies during the biggest
| tech bull market in history and get very rich
|
| 2. Build a Twitter following and preach on topics on which you
| have zero knowledge or experience
|
| 3. People will believe you because you are rich (like they want
| to be) and so you must obviously be a genius
|
| 4. Use that influence to push your political views and/or other
| hustles like your favorite cryptocurrency, NFTs, SPACs)
|
| The standard VC playbook these days
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