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Message: <blockquote data-quote="Anon08" data-source="post: 70734">It is fascinating to hear the recent discussion around SPACs, which are often portrayed as a new phenomenon. In fact, it's a pretty old one, with the last SPAC 'boom' occurring in early-mid 2008, before, naturally, the '08/09 crisis. Just bear this in mind if you plan to bring this up in applications/interviews!I think [USER=1572]@Dheepa[/USER] gives a really nice summary of some of the problems surrounding SPACs and their introduction in the British market. However, I'd like to share some of the upsides of SPACs - not just for investors but also for PE actors!First, I think SPACs are a great way to get retail investors in on PE. Quite simply, SPACs are an ingenious way for PE actors to raise capital to fund their M&A/restructuring. Previously, the only people to benefit from the lucrative business of PE were the financial providers - basically, the banks. However, SPACs allow retail investors to get in on the action. Yes, there are concerns about diluting, and so on; nevertheless, I think that a new investment opportunity shouldn't be sniffed at (at least, too hard)! With the rise of retail investing, it would be rather fun to have 'the ordinary Redditer' get involved with slightly more mainstream investment - although "Pershing Square Tontine Holdings, Ltd.-to-the-moon" doesn't quite have the same je ne sais quoi as Musk's "Gamestonk!!". Time will tell whether having shares in SPACs will become part of the ordinary individual's investment portfolio...however, I have a hunch that such investment will be here to stay.Second, SPACs are useful for more, shall we say, controversial or bombastic PE actors when it comes to attaining financing. Consider Bill Ackman. He is, undoubtedly, a very successful individual. However, he has his quirks and his eccentric personality. Let's not forget his rather gorgeous way of stating that his SPAC was looking for some juicy targets: 'we're in a unicorn mating dance, and we want to marry a very attractive unicorn on the other side that meets our characteristics'. In an age where trends are being bucked, and technology (and, bizarrely, memes - that's right, gotta go fast, boomer), are outstripping the vision and comprehension of the mainstays of Wall Street, there may come a time when PE actors want to attempt something a little too outside of the box. In those instances, they might struggle to attain funding via usual sources, like banks. However, with a SPAC, there is no need to go and lobby the suits in glass atriums - instead, pop a post on r/WallStreetBets and appeal to the masses. I'm being a little facetious and dramatic - but the sentiment remains true: exotic investments may turn the stomachs of traditional lenders, in which case, the sponsor may turn to the markets and rattle their can...Third and finally, SPACs subvert the traditional processes, like an IPO, for a reason - they are flawed. WeWork, Uber, and countless more wannabe-hip IPO businesses have touted themselves as something they are not. What then happens is, lo and behold, they list on the market, and their share price tanks, as investors realise they have been taken for a ride on the preceding roadshow (who would have guessed...). I really love the resurgence of SPACs as they explicitly highlight other flaws in the regulation of markets. In a way, these enterprises say with an admirable, brazen tone, 'if you don't like it - fix it!'. If one adopts this devil-may-care, slightly cynical perspective, one may be inclined to argue that when IPOs are so misleading and so dubious, one is better placed to trust a SPAC - I don't know about you, but I would trust Bill Ackman who says he just wants to make money, more than Uber, who keeps trying to claim, as was documented in its legal escapades, that it is a technology company that is creating some kind of interconnected web that links tens of thousands of people together (I am not particularly convinced...). [It is no secret that private fund managers, PE houses, and other related parties, do have very thickly-lined pockets. However, amongst other things, that is a testament to the profitability of the industry - this echoes my first point - let the retail investors have (even a small) slice!]Remember, SPACs are, for the most part (in the 2020/21 resurgence), just standard PE stuff with a different method of financing. So, a target company might sell some of their equity to a PE house/SPAC to raise capital (where other alternatives are now available, such as direct listings); however, this is not the only reason a target company might dance with SPACs (the benefit of onboarding expertise - or what I like to call, the Dragons' Den factor). Hence, when candidates analyse SPACs, I would recommend a focus on:<ol> <li data-xf-list-type="ol">What is the process of PE? How does it work traditionally, and why do financial actors participate in it?</li> <li data-xf-list-type="ol">What aspect of the PE process do SPACs alter? How does it alter it? What are the pros and cons compared to the traditional method(s)?</li> </ol>Right, that's probably horribly jumbled, but I hope that elucidates the other side of the coin!</blockquote>

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