Bill Ackman to wind down SPAC, return $4B to investors

https://seekingalpha.com/news/3856007-bill-ackman-to-wind-down-spac-return-4-billion-to-investors

by prostoalex • 4 years ago

81 54 4 years ago

https://news.crunchbase.com/business/terrible-spac-performer...

“For SPAC investors, however, the good news is there is only a limited distance left to fall. If you’re trading at $2 for instance, at least there’s only $2 left to conceivably lose.”

The SPAC scene in a nutshell haha.

vagab0nd• 4 years ago

Are they serious? This reminds me of "it's already down 90%, only 10% left to drop". But it doesn't sound like they are joking in the article.

smabie2• 4 years ago

Turns out that even if you're down 90% you can still go down another 100%.

JohnJamesRambo2• 4 years ago

It’s a Poe’s Law moment for sure. But I get that a lot reading things like Crunchbase and Motley Fool.

zrobotics• 4 years ago

This reminds me so much of the ICO bubble. It just seems like fancy ways of dancing around SEC regulations. At least the ICO folks were honest about avoiding regulations, a SPAC seems like it is very transparently saying "we want to have a public company for the sole purpose of acquiring a private company that can't pass SEC scrutiny". It's a "saying the quiet part out loud" thing.

mschuster91• 4 years ago

The concept is nothing new, at least for Germany - we have long established two different variants of "shelf corporations" for the purpose of taking a short circuit to usual regulations: one that is explicitly created as a blank slate for a buyer to buy, usurp and use to be traded publicly ("Vorratsgesellschaft"), and the other one being a company that has been wound down but not formally dissolved ("Mantelgesellschaft"). The former is (or was, until Brexit) especially popular with British Ltd.-style companies because these were easier to set up than a German GmbH/AG.

Something like a SPAC is new as a concept, but in the same legal vein - the only difference is which side brings the capital. In the classic cases, the "acquired" company brings the capital, in a SPAC the acquiring company - but (at least here) it is of no matter legally.

yreg2• 4 years ago

Doing a traditional IPO is a slow process that can preoccupy the company and set it back for a year or more. For some growth companies it is a rational and legitimate choice to go public through a SPAC.

jjeaff• 4 years ago

Ya, and paying your taxes can be a long and arduous process too. That doesn't mean it's ok to just skip all the hard work.

Going public is not difficult "just because". It's difficult because there are a lot of reporting and due diligence and research and compliance required before your company is opened up to the public market for investment. It's there to keep garbage companies like Truth Social from going public and bilking unsophisticated investors of their money.

It seems to me that a spac is just a technically legal way to get around the spirit of the law.

kryptiskt• 4 years ago

I don't understand the mindset of the people who are the investors in the SPAC IPO though. They are buying a loot box which could turn out to contain anything.

hef198982• 4 years ago

There is a very troubling trend to ignore regulations and comoliance. Either out of convenience or because the whole business model is build on it.

Those regulations are there for reason, and lot of comoanies adhere to them. If a "growth company" is unable or unwilling to do so, it should simply not be a public company (unable) or no business at all (unwilling).

raiyu4• 4 years ago

Having gone through an IPO (cofounder DigitalOcean), it honestly wasn't a set back internally. The majority of the burden is on the finance team, having your finances in order and audited is a huge benefit to the business, the rest of it is around internal process control, some are perfunctory, others are good investment of time.

The rest of the work is done with the bankers as they draft the S-1 along with information provided by the management team.

In terms of pitching the bankers, ours was during Covid so there was no travel, it was all done remotely, and given the large financing event that the IPO was, the amount of time invested vs the capital raised was certainly worth it.

IPOs open up liquidity for shareholders, early employees, also provides new avenues for the business to create financing for various activities as you are now seen as a premier partner with all of the major banks. Honestly worth the effort, so long as you continue to run the business with a long term mindset and don't give in too much to the quarterly pressure it's a huge plus.

Besides the obvious benefits to shareholders and early employees it also does open up a significant amount of opportunities when it comes to M&A, if are strategic with that, it can dramatically change the outcomes for your business.

adrr• 4 years ago

We did an IPO last year took us 6 months and wasn't a huge amount of effort. SOX part of being public is much more challenging from an effort standpoint and requires effort from all departments. IPO process was handled by our finance dept. From the tech standpoint for the IPO, I just had to sit on a few conference calls from the bankers going over risks to the business. S1 was easy, wrote bullet points and the consultants did the rest.

I'd pick IPO over doing a vc funded round any day of the week. Effort is way less. I never had to give up full days during the IPO process. Never had people on site doing interviews with my team and going over my architecture and scrutinizing every decision I made.

isitmadeofglass• 4 years ago

I see it more as a balance of market pressures thing. An IPO is a private company saying it would like public money, a SPAC is public money saying it would like a private company. And naturally there is less scrutiny on the SPAC because it’s in the driving seat on the acquisition and can cary out due diligence, where as the IPO you have to vet that the company is ok to go out to a market of a wide range of individuals who cannot do a due diligence individually.

lordnacho• 4 years ago

It's an opportunistic play that didn't find an opportunity. Pretty reasonable to return the money.

Ackman still has a reputation to protect, so he needed to look for some sort of reasonable deal with good flippability (that's the Latin term). That's gone now with all the air deflating from the SPAC market. A SPAC play would not likely be the kind of thing he'd buy and hold for ages, especially as everyone knows there's some serious adverse selection going on concerning which firms will go for a SPAC.

There's a fair chance his sales guys are able to simply move the investors over into his main fund or some similar vehicle, so it's not actually such a big deal for him financially. Plus you get kudos for not doing something that might be seen as reckless or profiteering.

mikebos• 4 years ago

I have a somewhat different opinion. He found a target, failed to meet SEC regulations with the negotiated deal and took the deal for his main fund. After that he basically threw the towel on the spac. This happened approx a year ago.

Not finding a good deal is understandable, finding a deal and messing it up not so much. With his army of lawyers this looks from the outside more an deliberate strategy then a honest mistake.

Edit: link https://www.bloomberg.com/news/articles/2021-07-19/pershing-...

saos• 4 years ago

Dabbled in SPACs since 2019. Glad I got out when it peaked.

gregwebs• 4 years ago

Best performing SPAC of the year if investors are getting all their money back.

abduhl• 4 years ago

Are they? Most likely bought in at an overhyped valuation of over $20 and are now only receiving $20 back.

SkyMarshal• 4 years ago

How would they have lost money, other than management fees, if none of it was invested?

enlyth• 4 years ago

Still not as terrible as some SPACs, the all time high was around $30 for PSTH, so the worst haircut you could get is to be 33% down if you had bought at the very exact top.

giantg22• 4 years ago

They should get the $20 back, and rights to buy into the next opportunity at a fixed price. I'm pretty excited about that.

bsenftner• 4 years ago

What a lack of imagination, "can't find a suitable investment".

cosgrove• 4 years ago

Note that they mentioned the investment must be executable as well. Straightforward to find something to buy, but might be hard to convince the owners to sell.

tqkxzugoaupvwqr• 4 years ago

I’m down 15% (don’t ask). When is the right time to sell?

UkrainianJew• 4 years ago

The best time was at the peak. The second best time is now (*)

* - not an investment advice.

emehex• 4 years ago

I was somewhat interested in PSTH when UMG was the target. Shame BA used PSCM instead of PSTH to buy the 10% stake from Vivendi...

wafriedemann• 4 years ago

SPACS were just a new solution to an old problem: Dumping overpriced assets to small investors. I've seen it all through my dad's investments, which local banks sold him. Younger people don't fall for that trick anymore, so et voila, SPACs are born. Same shit, new name. There was an article just a few weeks ago in the FT, that showed how PE firms are pumping up company prices by buying companies they already own. At the end this garbage needs to be dumped on someone, otherwise why bother.

Bill Ackman to wind down SPAC, return $4B to investors

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