Barron's: "SPAC IPOs fall out of favor after hot streak"

If April could be distilled in a sound, it would be that of brakes screeching on market enthusiasm for special purpose acquisition companies. 

There have been only six new SPAC initial public offerings so far in the second quarter, according to Goldman Sachs data.  That’s a rounding error compared with the 55 SPAC IPOs in the first few weeks of the first quarter, which ended with 277 new SPACs raising combined proceeds of $91 billion.

~ Carleton English, "SPAC IPOs Fall Out of Favor After Hot Streak," Barron's, April 24, 2021

Andrew Ross Sorkin on the SPAC boom

In Wall Street’s usually brash way, a new saying is making the rounds. It isn’t in good taste, but it speaks to a phenomenon that is transforming finance and corporate America. 

“I know more people who have a SPAC than have Covid,” several financiers have told me recently. (If you’re wincing, you’re not alone. I am, too.) 

SPAC stands for special purpose acquisition company, the biggest thing in financial markets of the moment. Hundreds of these publicly traded shell companies are being created by everyone from KKR, the leveraged-buyout firm, to Alex Rodriguez, the baseball player turned entrepreneur. Just on Tuesday, the football player Colin Kaepernick filed for his own $250 million SPAC. 

These vehicles have only one purpose: to find a private company and buy it, usually within two years. SPACs are sometimes known as "blank check" companies — as in, investors give them a blank check to go buy a business, sight unseen.

~ Andrew Ross Sorkin, "Wall Street’s New Favorite Deal Trend Has Issues," The New York Times, February 10, 2021

Former baseball star Alex Rodriguez announced
this month that his investment firm was aiming
 to raise $500 million for a blank-check fund.
Credit...

Matthew McLennan on speculative excess

Q: Are there signs that investors aren’t taking these risks seriously? 

A: There are periods where the market pays a premium for growth, and then there are market environments where it’s not even about growth—it’s about optionality and acceleration.  You see that in multiple dimensions now: Witness the dramatic rise of Bitcoin or the eye-popping valuations of some of the larger companies in technology or alternative energy.  Or the whole creation of the SPAC [special purpose acquisition companies] market where, again, people are paying for optionality—they’re paying for the potential to own a business.  They don’t even know what it is yet.  Things like that make one a little wary. 

I’ve also received calls from friends of my children and older people—all wondering how they can make money quickly in some of these emergent fields.  I haven’t received such a frequency of calls since the late 1990s.  It feels like one of those moments where it’s worth reminding people that the whole point of investing is to preserve purchasing power.  If you’re prudent, you hopefully grow your purchasing power in a way that’s resilient.

~ Matthew McLennan, portfolio manager, First Eagle Investment Management, "A Time for Worry - and For Yogurt," Barron's, April 17, 2021

Will McGough on the rise of SPACs and cryptocurrencies

There is so much $$ sloshing around now which will have its own impact.  You could argue the rise of crypto and SPACs are just vehicles to absorb all the new money.

~ Will McGough, Stadion Money Management, "One year ago stocks dropped 12% in a single day. What investors have learned since then," CNBC.com, March 16, 2021

Andy Serwer on the boom in SPACs

The growth has been wack. In 2019, according to SPACInsider, 59 SPACs worth $13 billion were created.  Last year there were 248 worth $83 billion.  And already, just six weeks into this year, there are 135 SPACs which have raised $40 billion.  Many more are on tap.

~ Andy Serwer with Max Zahn, "What the SPAC frenzy tells us about the market and ourselves," Yahoo!Finance, February 13, 2021