The SPAC Tree Has Some Disadvantages

The SPAC Tree Has Some Disadvantages

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There’s a new saying making the rounds on Wall Street, Andrew writes in his latest column. It’s not in good taste, but it’s the new trend transforming the financial world: “I know more people who have a SPAC than Covid,” financiers continue to tell Andrew. (We warned you.)

The rise of the blank-check company shows no signs of slowing down with SPACs – or special-purpose procurement firms – raising nearly $ 26 billion in January, a monthly record in a red-hot market. These listed shell companies exist solely to find a private company to buy and to take shares. SPACs typically achieve a target of about five times as large: With more than 300 such funds having approximately $ 100 billion in cash currently available, this implies a financial firepower of $ 500 billion.

“Every friend starts a SPAC,” billionaire fund manager Bill Ackman told Andrew. “It’s like, ‘Oh, yes, I have one too. ” Mr. Ackman’s SPAC is the largest and raised $ 4 billion last year. (He has not yet mentioned an acquisition target.) Other financiers joining the SPAC include technical investor Chamath Palihapitiya, veteran banker Michael Klein and buyout specialist Alec Gores, who all have multiple SPACs. Yesterday, former NFL fullback Colin Kaepernick applied for his own SPAC.

“As a man who made transactions in the market in 1999, it feels exactly like back then,” says Terence Kawaja, founder of boutique bank Luma Partners. (He was a banker when he sold Time Warner to AOL.) “I’m worried about public investors. There are several wrong incentives between the sponsors who set up the initial capital of a SPAC, and the investors who come later, especially after a company has been bought:

  • Sponsors often say that they have invested in a SPAC’s transactions, and aligned it with other investors. But they also get mostly free interests, so, as Andrew writes, “they play partly with house money.”

  • Large mainstream investors who put money into a SPAC transaction often get favorable terms that guarantee them a modest but predictable return, no matter what happens.

  • Sponsors owe investors no fiduciary duty in the takeover, and few people seek so-called fairness opinions to validate the price they pay.

  • SPACs should generally use or return the money they have raised for a takeover within two years to stimulate them to any agreement done, rather than a good one.

This is not to say that traditional IPOs are better, as Andrew explains (speed and security make SPACs more attractive to many of the acquired companies). Some sponsors are considering ways to make SPACs more investor-friendly.

President Biden meets with CEOs to advance his stimulus plan. The leaders of Gap, JPMorgan Chase, Lowe’s and Walmart met with Mr. Biden meets to discuss his $ 1.9 billion proposal and efforts to raise the minimum wage to $ 15 per hour.

Day 1 of the indictment. The Senate voted 56-44 that the proceedings were constitutional, after Democratic House indictments played disturbing highlights during the Jan. 6 riot at the Capitol. Former President Donald Trump, who is accused of inciting violence, is apparently angry at the twisted defense of his legal team.

A real estate giant could try to forge ties with Mr. To cut Trump’s business. Vornado is said to be considering buying out the Trump organization’s interests in office towers in Manhattan and San Francisco, according to The Wall Street Journal. Steve Roth, head of Vornado, believes prospective buyers have stayed away due to the connection with Mr. Trump.

Salesforce allows permanent work. The software giant will let most of its 54,000 employees work from home at least two days a week, and some will do so full-time. It could transform San Francisco, where Salesforce is by far the largest employer.

Huawei disputes its status as a threat to national security. The Chinese telecommunications giant has filed a lawsuit in the U.S. Court of Appeals for the Fifth Circuit to review an FCC ruling issued by the Trump administration in December that prevents it from selling equipment to U.S. companies.

The U.S. Chamber of Commerce has appointed Suzanne Clark as its new CEO, replacing Tom Donohue in place of his 22-year career. She is the first woman to run the Chamber in its 109-year history. The Times was the first to speak with Mrs. Clark spoke about her plans for the country’s largest business group.

“The Chamber has a collaborative economic agenda, and we will work with anyone who wants to promote it,” Ms. Clark said. This is perhaps easier said than done, as the group has been closely with the Republican Party for much of its tenure. Perhaps her most difficult challenge is to upset the balance between Republicans over the group’s new allies and the Democrats who have historically viewed it as an antagonist.

  • After joining the chamber in 1997, Clark left for the Potomac Research Group and the National Journal Group in 2007. She will return in 2014 and be promoted to president in 2019. She also sits on two corporate boards.

She takes over as business recalls his relationship with politics, to address social issues and evaluate the effect of political donations, especially after the riot in Capitol. Mrs Clark has already called for the modernization of the Chamber’s platform, focusing on issues such as bridging the racial prosperity gap and addressing climate change. Yet there are many core principles that are the same: it is against raising the federal minimum wage to $ 15 per hour and the setback of Trump’s corporate tax cuts.

Ms Clark said businesses need to strike a balance between the core and their role in society. ” Part of our job is to help a business do well – it’s a lawyer’s job where we say we want to create the right conditions for job creators to thrive, ” she said. “But the other part of our job is to help businesses do good, whether it’s ESG, whether it’s equality of opportunity, or it’s figuring out the issues that CEOs are increasingly being asked to talk about.”

Is it over? GameStop’s share drops 86 percent from its peak at the height of meme-stock mania. In terms of market capitalization, the decline wiped out about $ 20 billion from the trader’s value. The tree-and-chest pattern is similar to AMC, Bed Bath & Beyond and other companies that have gone up in seemingly short-lived madness.

As the pandemic disrupts commercial real estate markets in London and New York City, landlords are seeing how their traditional power is eroding. Some are asking for the overhaul of rental laws.

London landlords were forced to interrupt their tenants. The Times’ Eshe Nelson writes. Concessions include rental holidays and leases in which tenants pay lower base rents but add a percentage of gross income. Some tenants have used a company’s voluntary arrangement, similar to a pre-determined bankruptcy filing in the US, to strive for better terms.

  • There are still big challenges, says Eshe: ‘There are many more businesses wondering how they will pay months’ rent, which was built up while their doors were locked. In Britain, it is quite urgent because the moratorium on evictions expires at the end of March. Tenants and landlords need to find a sustainable way out. (Readers: If you face this challenge, contact rental, change your rental terms or are negative, please contact.)

In New York, large tenants are also pushing back. Condé Nast holds $ 2.4 million in rent from One World Trade Center, which was due last month as part of a dispute with its landlords. Landlords in New York also offer several months free rent and money for property improvements.

Cynthia Lummis is a livestock farmer, libertarian and the only known Senate Bitcoin holder. The Wyoming Republican, a vocal crypto supporter, spotted an opportunity after Tesla’s $ 1.5 billion Bitcoin investment made headlines this week: She asks Elon Musk on Twitter if he would consider moving to her homeland and boasting that “it has the best laws for digital assets.” Me. Lummis made the proposal “because of the pioneering spirit we share,” she told DealBook.

“We can not pretend it’s a fad,” Me. Lummis said. She sits on the Senate Banking Committee, among others, and start with a financial innovation caucus where she will try to persuade colleagues to follow the path of Wyoming. The state has drawn crypto-enterprises with fintech regulations that make it more attractive to set up shops there, the senator explained. Bitcoin investments by Tesla and other companies, and concerns about Chinese fintech dominance, underscore the need for federal laws, she said.

“The lack of fiscal discipline of Congress is responsible for the dismantling of our currency,” she said, explaining her interest in decentralized digital assets. “Debt addiction reduces the returns on their hard-earned dollars,” she added. Before she won her senate seat in November, Mrs. Lummis the Wyoming state treasurer and served four terms in the House.

  • Me. Lummis has been opposed to the College of Elections statement for the past month, so the crypto-evangelist may face political resistance to her positions, regardless of their merits.

Offers

  • A plan to force the sale of TikTok’s US operations to a group led by Oracle and Walmart could be suspended indefinitely by the Biden government. (WSJ)

  • Activist hedge fund manager Jeff Ubben apparently wants to raise up to $ 8 billion for a climate-focused investment fund. (Reuters)

  • Rivian, a manufacturer of electric vehicles backed by Amazon and Ford, is reportedly weighing a stock market this year. (Bloomberg)

Politics and policy

  • There’s a debate over whether the stock mania was traded by the Fed’s easy money policy – led by ‘JPOW’, as Fed Chairman Jay Powell is known on messages. (NEW)

  • Robinhood has registered its new internal lobbying team, which plans to focus on accounts that could hurt its business model, such as a proposal for a transaction tax on shares. (CNBC)

Technical

  • The game studio behind ‘Cyberpunk 2077’ said that hackers used the source code for its top games and other confidential information. (Business Insider)

  • “How will Jeff Bezos spend his billions now?” (NEW opinion)

The best of the rest

  • Fox Corp. has reported an increase in profits for Fox News, defending its flagship asset despite a $ 2.7 billion defamation suit and challenges from far-right news competitors. (NEW)

  • Goodbye, Aunt Jemima. Hello, Pearl Milling Company. (NEW)

  • Make sure you turn off comic book zoom filters before important meetings, such as a court hearing. (NEW)

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