SPACs are a rare positive exception to that usual logic. The people who bought in get their money back, the "sponsor" (usually a financial engineering company) is the one who loses out.
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.
They're a heck of a lot more than Electron at this point. They're really in the satellite parts business at this point, with launch services as a side business. For the last two quarters, they made almost 2x as much on "Space systems" (solar panels, busses, etc) as they did on launch services. Launch is nice and visual so it gets all the attention, but it's only 1/3 of their revenue.
Not really. You just have to ask yourself why these private companies were even going the SPAC route rather than do a regular IPO. The answer was usually that these were not particularly great companies, and doing an IPO means the company is put under a lot of scrutiny. SPACs are a way to avoid that, so insiders can cash out.
Or they were high capital low margin businesses. There are many of these out there, like defense or airline businesses. We need them to exist, but investors don’t like them because it’s harder to make money from them. It doesn’t mean the business is bad, it just means payoff is longer. SPACs are one of the few ways they can get money.
Defence is a different beast, and not necessarily low margin neither. Airlines as well, except the margin are tighter there. Since both industries are rather well understood by investors, IPOs and general investment are not that much of a problem.
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.
One that I know of is Wheels Up. It's a membership company for flying privately.
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.
It depends on your time horizon. Lots of people deride Chamath's SPACs, but several of them traded well above their initial $10 price for 1.5+ years until the market started dropping at the beginning of this year.
SKIN - still trading above NAV post-merger despite all the market turmoil. It's not one of the "sexy" SPACs in EVs and stuff though, they make beauty products and most of their business is consumables for those products.
> is a shell corporation listed on a stock exchange with the purpose of acquiring a private company, thus making it public without going through the traditional initial public offering process and the associated regulations thereof.
Not sure why you’re getting downvoted, this is a primarily tech forum and a SPAC is a primarily business concept.
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.
But once one questions and another answers, the answer would be available right here on Hackernews. Hundreds of people would save time + comprehend better because the answers here would explain in a compact and comprehensive manner and that too from the perspective of a tech-savvy person.
Innocent question: how do I check whether I am being downvoted? Is this something you see only after you cross the 500 karma points? A quick Google search didn't return anything related.
That said, there is value in deprioritizing basic and low effort questions.
While these may be helpful for those who do not know, they get in the way of more productive conversation.
Nobody should flag such a question, but it isn't particularly interesting or insightful.
God forbid we actually talk to people to learn something…
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.
The other big reason they’ve become so popular lately is that they allow private companies to go public without an IPO (thus avoiding a lot of the disclosures that would otherwise be required).
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
Yeah, this is the key context: people have argued that they're essentially a way of capturing all the value of a "going public" event to a smaller audience than a traditional IPO.
A SPAC, or Special Purpose Acquisition Company, is a type of investment vehicle that is formed for the purpose of acquiring or merging with another company. SPACs are often used as an alternative to the traditional initial public offering (IPO) process, as they provide a faster and more efficient way for a private company to become publicly traded.
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.
Presumably the SPAC itself must go through some IPO-like process in order to get listed. If it doesn't get listed then its shares aren't liquid.
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.
I mentioned that they IPO in the second paragraph.
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.
The SEC requires disclosure of financial data in a regulated way, and a prospectus that does not use forward looking statements or something akin to that.
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.
It's a company that goes public (trades on a stock exchange) with no actual business. It sells new shares (traditionally for $10 each) to investors, creates a pot of money (the size needed determines the number of shares sold) and promises a business model of "acquire [existing thing]". It then has some amount of time to set up the acquisition and get the shareholders to approve it. If it doesn't, the $10/share (plus interest) is returned to them.
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.
Due to how SPACs work, investors will be getting most of their money back. Typically they IPO at $10. The money gets returned if no deal is made.
> 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.)
That's standard. I don't exactly know why except that it's a convenient price for retail investors and it lets them re-use their old contracts. The pool of money that they collect at IPO varies a lot, though.
They will structure the deal such that the value of those shares is targeted to be about $10. Seems like they don't always achiever that. One of Chamath's DNA SPACs only started trading recently and is way down: https://www.google.com/search?q=NASDAQ%3A+AKLI
Before the merger goes through the stock price has a floor of $10. Typically the SPAC will IPO and start looking for a deal, this takes around 1-1.5 year. During that time the stock will be trading at around $10. When a deal is announced it typically takes 3-6 months for the merger to complete. The floor is still in place during that time. After the merger goes through the floor disappears and it starts trading like a normal stock.
Always $10, the share price is a complete fabrication so this just became a trend because it’s a nice number that’s easy to calculate %s from and the S-1 math was more standardized.
A lot of people park their cash in SPACs at NAV and pull them when a deal is announced (but before the merger). You get the treasury rate (minus expenses) with a chance of a pop if an exciting deal is announced. It really is a +EV situation and if you did that last year you made a ~1.5% ROI as opposed to the -15% of the S&P
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.
But sometimes I have a paranoid notion that the managerial and legal class have constructed systems where they contain some liability into a black box, then hire someone unknowing to live in the box. The people outside the box are just designing the process and “relying” on the box to behave as expected. The people inside the box don’t know about the context and therefore don’t have mens rea. Nobody is guilty of a crime.
The story in this thread tickles that paranoia. I can imagine a person on one side who has implemented a compliance checking system, where as long as nothing gets flagged by the black box, the system reads “compliant”. It turns out the person in the black box is deleting the non compliant records. But they don’t realize that they are allowing someone to falsely fulfill their compliance certification, they are just making the box work.
I don’t mean to imply that any set of people is inherently “in on” such a conspiracy. I imagine it would evolve organically and every individual case would be different.
Lawyers get paid to advise people how to avoid legal liability.
Managers get paid to handle problems, and sometimes to recognize which problems the people one level up would rather not know the details of.
I don’t think it’s off base to say that managers and lawyers would be involved where there is a scheme like I describe.
people of certain class have shared interests, that's what makes a class. so they broadly act in the same way because they're responding to the same incentives, no conspiracy needed.
Managerial class is not that strange as a concept, they demonstrably do collude and perform favours behind closed doors.
Legal class is a little strange, as that is a group of people that are mercenary: They won't really be in on anything, they'll just be paid to facilitate it. They're like a cloud or a tiger: It rains, it eats other animals. That is what it's for.
sheesh. I'm talking about us paying for a file delivery service because we want to make a report about something like total number of dividends announced last week or something like that. You'd be able to do that with a daily corporate action file from about 25 different vendors. But a corporate action file contains a lot more than dividend announcements!
The vendor says that for records of type A, characters 12-17 represent a unique ID or something else that is very boring. For records of type B, characters 15-25 represent another ridiculously dumb thing that I do not care about, but the vendor says it will never be missing and will always validate with a checksum algorithm.
I'm being pretty opaque on purpose.
For this particular SPAC merger, there is always something wrong with the record. And I, being someone who neither built the system nor is authorized to change it, must go in, read the stupid text about the buzzword-filled company description, count 723 empty spaces on a single line to find where the error is located, verify that something is missing, and go have a little meeting where we discuss whether to ask the vendor to fix and resend, edit the file to put dummy data in, or just delete the damn record because nobody on our end cares if it exists.
I mean, I guess that could be nefarious, but it's really not. We have to pay extra to get only the stuff we want, so we just get it all and let the hapless developers deal with it.
Sorry, didn’t mean to go and make your story the object of my most paranoid thoughts.
It seemed like someone else was trying to express the same thing I had thought and not succeeding, and I felt inclined to share and maybe help them and myself to be understood.
Having been forced to read the various filings by this company, it makes me angry that it could one day be in people's retirement index funds. How that is even possible is worthy of many cynical and potentially paranoid thoughts :)
> The pair of cancellations, which happened less than an hour apart
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.
SPAC redemptions are just investors asking for their money back so they can use it elsewhere. From the SPAC share owner's perspective this is the system working as intended.
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.
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).
They incur significantly less disclosure from the actual business that's going public than an IPO does (because the SPAC files these instead, before they've chosen a target). So, a business that thinks it's too weak and/or early to IPO can merge with a SPAC instead.
Inherent is a bit loaded of a term. Going public via a SPAC isn’t inherently bad. But it allows companies to go public without normal disclosures allowing investors the ability to do “normal” diligence.
That seems, inherently, to be a loophole that can be easily exploited (See Nikola). So, there’s that.
Their main benefit is price certainty, so they attract volatile offerings. Theoretically they're attractive for companies whose price depends a lot on external factors; you could imagine that being e.g. a company that uses a lot of expensive raw materials or something, but in practice it's mostly companies in hype-driven industries or those whose success is completely dependent on one or a small number of other companies (e.g. a company making iphone accessories is completely dependent on how well the iphone is doing), and those don't tend to be the strongest or most solid companies.
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.
118 comments
[ 2.5 ms ] story [ 189 ms ] threadThe 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].
[1] https://en.m.wikipedia.org/wiki/Wealth_effect
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
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...
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.
SPACs collapse as $11B of bad deals are called off within an hour
https://en.m.wikipedia.org/wiki/Special-purpose_acquisition_...
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.
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.
Nobody should flag such a question, but it isn't particularly interesting or insightful.
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.
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
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?
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.
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.
I only clicked on it because I misread it as SPARC thinking it was an article about Sun's RISC CPU
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.
> 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.)
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 :)
But sometimes I have a paranoid notion that the managerial and legal class have constructed systems where they contain some liability into a black box, then hire someone unknowing to live in the box. The people outside the box are just designing the process and “relying” on the box to behave as expected. The people inside the box don’t know about the context and therefore don’t have mens rea. Nobody is guilty of a crime.
The story in this thread tickles that paranoia. I can imagine a person on one side who has implemented a compliance checking system, where as long as nothing gets flagged by the black box, the system reads “compliant”. It turns out the person in the black box is deleting the non compliant records. But they don’t realize that they are allowing someone to falsely fulfill their compliance certification, they are just making the box work.
Lawyers get paid to advise people how to avoid legal liability.
Managers get paid to handle problems, and sometimes to recognize which problems the people one level up would rather not know the details of.
I don’t think it’s off base to say that managers and lawyers would be involved where there is a scheme like I describe.
Legal class is a little strange, as that is a group of people that are mercenary: They won't really be in on anything, they'll just be paid to facilitate it. They're like a cloud or a tiger: It rains, it eats other animals. That is what it's for.
https://m.imdb.com/title/tt0123755/
The vendor says that for records of type A, characters 12-17 represent a unique ID or something else that is very boring. For records of type B, characters 15-25 represent another ridiculously dumb thing that I do not care about, but the vendor says it will never be missing and will always validate with a checksum algorithm.
I'm being pretty opaque on purpose.
For this particular SPAC merger, there is always something wrong with the record. And I, being someone who neither built the system nor is authorized to change it, must go in, read the stupid text about the buzzword-filled company description, count 723 empty spaces on a single line to find where the error is located, verify that something is missing, and go have a little meeting where we discuss whether to ask the vendor to fix and resend, edit the file to put dummy data in, or just delete the damn record because nobody on our end cares if it exists.
I mean, I guess that could be nefarious, but it's really not. We have to pay extra to get only the stuff we want, so we just get it all and let the hapless developers deal with it.
It seemed like someone else was trying to express the same thing I had thought and not succeeding, and I felt inclined to share and maybe help them and myself to be understood.
Having been forced to read the various filings by this company, it makes me angry that it could one day be in people's retirement index funds. How that is even possible is worthy of many cynical and potentially paranoid thoughts :)
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.
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.
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).
That seems, inherently, to be a loophole that can be easily exploited (See Nikola). So, there’s that.
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.
The structure itself though is neutral of course.
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.
More info here to understand just what happened with the Circle one.