SPAC Week…SPACs Are Here To Stay This Time…BUT….

I always assume anything I do in the markets will be the ‘top’.

Now that I am CEO of a SPAC it is safe to assume the market for SPACs will implode…cue Rodney Dangerfield.

Sure enough…Chamath’s Clover Health SPAC has plummeted through $10 to $8 and so here we go?

Jefferies notes:

Worst week of de-SPAC performance in months…

For the first time in a long time, de-SPAC momentum turned negative, with profit takers becoming increasingly aggressive. This was not only highlighted by the CCIV / Lucid deal announcement this week, but also accelerated by it. As a quick recap, CCIV traded through trust to $50+, an event we’ve never seen before (and something we doubt we’ll see again), on the news of a rumored transaction with Lucid Motors. Through last night’s close, CCIV was down 46%.

Other de-SPAC announcements were met with tepid investor responses. On average, deals announced this week were down ~7% through last night’s close vs. pre-announcement levels.

Social Leverage (our funds) have so many great LP’s from diverse business backgrounds.

They do not pull punches with Tom, Gary or I, whether they are investing with us for the first time or in each of our four funds. We want and need their feedback.

I received this note from one of our LP’s yesterday – a long time successful private equity professional and friend:

I enjoyed your SPAC interview – particular your focus on the underlying business fundamentals. The SPAC model is clearly interesting but to me not really different than being excited about investing in an IPO without regard to the understanding the underlying company and its prospects. The fact that everyone and her brother is getting into the SPAC business is actually not a very good sign. When the hype expires I expect there will be a lot of losers. That said, the right combination of factors could no doubt produce attractive results.

Amen!

I have found it silly that SPACs were trading 20-50 percent above $10 BEFORE investors had even seen a transaction closed. As my LP noted…eventually the hype expires.

That does not mean I will not charge ahead with great people to try and do great things.

The markets will open and close for SPACs for years to come, but SPACs are here to stay.