SPACs collapse as $11B of deals are called off within an hour
bloomberg.com
bloomberg.com
We get a daily file from a vendor containing corporate action data, because somebody "needs" it for some report or something, and so we dutifully ingest it into our system.
But every 2 or 3 months, a specific planned SPAC merger shows up in that file. Something to do with gambling and crypto/blockchain, based in the Med. Every single time it shows up, it causes the vendor file to fail the vendor's own validation rules and so I have to go look at the log, confirm that it is this same merger, confirm that the person that cares about this file doesn't care about this record, delete it, and then let the process allow the rest of the data to flow out of the staging table.
I hope this is one of them :)
Is this literally just two cancellations? I never put any money into a SPAC, but I suspect the shareholders are better off with their money returned than going into a bad deal. Concord raised money at $10/share, and they are returning $10/share back. I don't feel bad for the investor that bought it for $13/share from an exchange and lost $3. Concord didn't do business, they didn't produce a product, they never merited a 30% above cash market price.
Before I read the article, I was wondering if the SEC stepped in, or if some sort of financial services Sybil attack just unwound due to a bunch of not-so-independent-after-all players deciding to cut and run.
It is interesting that they have clauses to return shareholder money if the deals are cancelled (otherwise, this would be indistinguishable from a pump and dump scam).
Redemptions lower the amount of money in the fund, which gives them weaker negotiating power when making the acquisition. I won't feel bad for the fund manager doesn't have enough money to buy the investment they had their eyes on. The downturn across all SPACs gives them less negotiating power as a class, but again, that's not a big loss for society.
> Concord’s sponsors will throw in the towel and return roughly $10.17 a share to investors, the SPAC said in a subsequent filing. The stock closed at a high of $13 in November 2021 and garnered attention from Wood’s Ark Investment, which is among the SPAC’s biggest investors with about 3.2 million shares, according to Bloomberg data. Her ETFs snapped up 222,800 shares last November, when the stock traded above $11, and bought 278,000 more in February on a day that it closed at $10.37, according to trading updates.
So if someone bought at $13 they lost 22% on the investment, but most probably bought at less than that.
(Not a financial professional; corrections welcome.)
Alec Gores, a well-known backer of special-purpose acquisition companies (SPACs), and former Barclays CEO Bob Diamond have seen two deals worth $10.6bn fail within an hour of each other. Gores Holdings VIII said it would not be merging with materials science tech firm Footprint, while Concord Acquisition pulled the plug on its deal with stablecoin issuer Circle Internet Financial. The cancellations are part of a broader downturn in the SPAC market, which has seen more than 55 transactions terminated this year.
All those companies relying on VC money to grow by selling dollars for dimes, in hopes of dumping the whole thing on retail investors through an IPO, well, those are in a lot of trouble now. As are those in need of a lot of capital to develop products, e.g. expensive hardware, that don't have a clear path to releasing a product to the market so far.
Private flights are insanely expensive, so at least there's a need. Unfortunately, there are also pretty high costs. No idea what Wheels Up financials look like.
that was an answer to "not really"
That is because he is a shyster.
Con artists make money and are equally as deserving of derision as people who go broke.
They look pretty good, but I think it's responsible to hold off on calling them a success until they launch Neutron. From what I can tell, it's not very likely that they can be profitable with just Electron.
Source: https://s28.q4cdn.com/737637457/files/doc_financials/2022/q3...
More info here to understand just what happened with the Circle one.
It means a “special purpose acquistion company”. It’s effectively a company set up for the express purpose of facilitating an acquistion or merger of companies, so that assets or IP ownership can be moved in an optimally tax or otherwise cost efficient way.
Many have argued they provide no value except for helping wealthy people retain their wealth, hence why you see a lot of folks here lacking sympathy in their collapse.
Public SPAC created with no business -> raises funding from investors (or marks) -> “acquires” private company -> SPAC renames to private company’s name -> private company is now public without IPO
Likely because you'll get the answer from first Google hit quicker than typing the question in English.
Edit: I don’t object to the question. Just stating my guess as to why the downvotes occurred.
Google will give you an expansion of the acronym and a generic business definition, sure. But I think it’s nice to be able to contextually tailor the response to the presumed audience of HN and the assumed expertise of the asker.
I get that us engineers are obsessed with efficiency in information sharing, but I do like participating in actually being a human from time to time.
Nobody should flag such a question, but it isn't particularly interesting or insightful.
SPACs are typically created by a group of investors, who raise money from other investors through an IPO. The investors provide the capital for the SPAC, and the SPAC's managers use that capital to search for a private company to acquire. Once the SPAC finds a target, the two companies merge and the investors in the SPAC receive shares in the newly combined company.
People use SPACs for a variety of reasons. For investors, a SPAC can provide an opportunity to invest in a private company without having to go through the traditional IPO process. For the managers of the SPAC, a SPAC can provide a way to raise capital and make a potential return on their investment if the acquisition is successful. For the target company, a SPAC can provide a way to become publicly traded without going through the time and expense of a traditional IPO.
I take it that they are subject to little scrutiny since it's just "we're a company with no business but a ton of capital", and the exchange and SEC say "sounds legit to me". Then they can "take over" the target, again with little scrutiny.
Have I got that right?
The SPAC going public can comply with those rules, because the business of the SPAC is simple (buy another business with the raised capital), and thus there's probably very little friction in their disclosure. Plus it can be done ahead of time - without knowing which company the SPAC might acquire.
It's a backdoor IPO basically. The "with little scrutiny" is assumed to be acceptable, because iirc, only accredited investors are investing i SPACs.
And yep, that's about right. Detractors claim it avoids filing regulations and that is bad while proponents say that it justifiably avoids direct listing which can be prohibitively time-consuming / expensive.
https://en.m.wikipedia.org/wiki/Special-purpose_acquisition_...
The thing being acquired gets to go public without needing an IPO. The people who buy the SPAC end up owning shares of the thing.
I only clicked on it because I misread it as SPARC thinking it was an article about Sun's RISC CPU
1) Ridiculously large, risk-unadjusted payoff for the promoter 2) Regulatory circumvention
Mix in some hype and voila - you get the same level of energy as a crypto-venture in traditional finance.
That seems, inherently, to be a loophole that can be easily exploited (See Nikola). So, there’s that.
The structure itself though is neutral of course.
SPACs collapse as $11B of bad deals are called off within an hour
The people who created and sold this asset probably ended up richer . And average people who bought the hype, sadly, poorer.
Of course it does. Wealth becomes money through credit. It promotes spending through the wealth effect [1].
There are some investors that bought SPAC shares and warrants at a premium, who are now at a loss, but primary issuance investors are just made whole.
Plenty of secondary buyers lost money. To say nothing of everyone who owns Circle.
I remember a decade ago Circle being a startup where VCs all invested like $30M in an early round and a month later the entire startup went bankrupt.
That Circle?
This circle doesn't need to go public, just jumped at the opportunity to have SPAC dumb money
If investors are not deterred there is nothing for the regulator to do
[1] some kinds of ETFs get blocked because the F stands for funds and publicly traded managed funds have gatekeeping imposed on the human manager