BREAKDOWN: SPACs 101... A Bubble, the Future or Both?
CoinDesk Podcast Network
CoinDesk
4.8 • 689 Ratings
🗓️ 27 July 2020
⏱️ 28 minutes
🧾️ Download transcript
Summary
A primer on, and critical look at, one of Wall Street’s hottest trends: special purpose acquisition companies.
This episode is sponsored by Bitstamp and Crypto.com.
Special purpose acquisition companies have been around since the 1990s, but have seen a significant uptick in popularity in recent years. Companies like Virgin Galactic, Draft Kings and Nikola have changed SPAC’s reputation from a tool for second- and third-tier private equity shops to win fees to a legitimate alternative to initial public offerings. In 2020, SPACs have made up roughly 40% of the IPO market.
Recently, chatter around SPACs reached a fever pitch with the listing of Bill Ackman’s Pershing Square Tontine Holdings - the largest-ever SPAC.
In this episode, NLW breaks down:
- What a SPAC is
- Standard SPAC terms
- Why the traditional IPO process has generated growing discontent, especially from Silicon Valley
- The benefits of SPACs for companies and investors
- The downsides of SPACs for companies and investors
- A number of reasons explaining why SPAC popularity is surging now
- How Robinhood retail traders are creating an important bridge buyer for SPACs
- Why Ackman’s Tontine Holdings SPAC could change how we think about SPACs in the future
- Are SPACs a bubble?
Cited resources:
SPACs as a Call Option on Hype - Bryne Hobart
SPACs: the most ludicrous bubble we’ll ever see… why not $IAC? - Yet Another Value Blog
Return of the SPAC - John Street Capital
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Transcript
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| 0:00.0 | the speed of SPACs make them a better fit for the narrative trade. |
| 0:05.3 | Hobart again says this. |
| 0:06.8 | He said, the standards for SPACs are lower, |
| 0:09.3 | so that any time there's a well-hyped trend or the possibility of one, |
| 0:12.9 | a SPAC is the right vehicle for a quick IPO. |
| 0:16.1 | Nicola is not a coincidence. |
| 0:18.2 | MP Materials, for example, is a trade war play. They're the only U.S. producer |
| 0:22.4 | of rare earths, and China has used rare earth embargoes as a policy tool in the past. So now is a |
| 0:27.8 | great time to offer the market a pure play on domestic rare earths. When I read that, what I see |
| 0:34.2 | is narrative and meme warfare in the markets, and the SPAC being a tool that is quick |
| 0:40.6 | enough to actually enable that. Welcome back to the breakdown, an everyday analysis breaking |
| 0:47.8 | down the most important stories in Bitcoin, Crypto, and Beyond. This episode is sponsored by BitStamp and Crypto.com. |
| 0:57.5 | The breakdown is produced and distributed by CoinDesk. |
| 1:02.0 | And now, here's your host, NLW. |
| 1:07.1 | What's going on, guys? |
| 1:08.3 | It is Monday, July 27th, and today we are talking SPAC, special purpose acquisition companies. |
| 1:15.0 | We're not doing a brief today because I'm actually recording this on Sunday. I won't be available in the morning to record tomorrow, so hopefully nothing too crazy happens and you're not like, why aren't you talking about that? |
| 1:25.2 | Bitcoin was up at 10K this morning when I woke up, |
| 1:27.7 | so it was a good Sunday. But let's talk about our main feature SPACs. Today's episode is going |
| 1:33.0 | to get into what they are, where they came from, why they're on everyone's radar right now, |
| 1:37.9 | and what the pros and cons are, and maybe what happens next. For anyone paying attention |
| 1:43.7 | to markets last week, you definitely heard |
... |
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