May. 09, 2022
Bloomberg reported the following today (key points pulled from article titled \"Goldman Is Pulling Out of Most SPACs Over Threat of Liability\"): \"Goldman Sachs Group Inc. is pulling out of working with most SPACs it took public, spooked by new liability guidelines from regulators and throwing into doubt the fate of billions raised for those blank-check vehicles... We are reducing our involvement in the SPAC business in response to the changed regulatory environment, said Maeve DuVally, a spokeswoman for New York-based Goldman Sachs. The policy could change if the SEC guidelines are scaled back... If Goldmans decision is followed by peers, that could hurt investment vehicles that have already gone public and are on the hunt for a takeover target. Its unusual for a bank to withdraw from an active blank-check firm because it typically works on the de-SPAC as well...\" (End Of Bloomberg Quotation) From the perspective of a retail investor, this is NOT a win. The SEC has effectively \"rug pulled\" investors who invested in SPAC warrants under the known regulatory framework, only to have the rules changed, threatening to send most warrants, many held by retail investors, literally all the way to $0. The average warrant for a SPAC still searching for a deal is down 6.6% today, and down 63% this year. This is significantly harming investors, threatening to put the SEC not far from the same level of harm as the bad market actors that the SEC has historically worked to prevent. SPACs are not the problem. The problem was excessive valuations at the end of a long bull market run. An analysis published April 24, 2022 by Tornike Laghidze showed that 2021 IPOs had declined an average of 43% from their IPO price and an average of 49% from their first day close. The study showed that 2021 deSPACs had declined an average of 46% from their IPO price. These are close enough to not be meaningfully discernible, and even show that SPACs may have performed slightly better for anyone who was not able to buy at the IPO price (such as the vast majority of retail investors). SPACs went through a bubble like much of the rest of the market. However, history has shown that market bubbles have funded the build-out of societally beneficial infrastructure such as telegraph lines, railroads, and the fiber optic cables underlying the internet. I would posit that the SPAC bubble funded the build-out of everything needed to maintain a healthy market such as SPAC research platforms and a large number of SPAC analysts (both professional teams and skilled individual investors) who can make informed long/short calls based on knowledgeability about SPAC dynamics and experience. The SEC seems to be seeking to throw away this major advancement. SPACs have a number of advantages for retail investors, a couple key ones being: 1) The ability to invest at the IPO price, which generally is not possible on IPOs (retail investors have to invest at the higher \"opening price\"). 2) The presence of a detailed investor presentation, which typically lays out the details on the company, market, and deal terms in a visual format that is more easily digestible than the IPO materials available to retail investors, thus making it easier for retail investors without large analyst teams at their disposal to quickly sift through deals to identify ones worth spending more time on. SEC, unless your goal is simply to monopolize the ability for institutional investors to profit on flipping IPO shares to retail investors, you are making a big mistake by trying to kill SPACs. Please reconsider what you are doing. There is no honor in this.