Bias for action. Gets things done. Go-getter. Traits companies big and small look for. And for good reason, you're being hired to do things! However, action is a secondary step that often overshadows the primary step, direction. Clear direction is the foundation that enables our actions to takeoff. Without it, we're stuck in the mud. Striving for clarity is an underrated skill. Having the courage to ask ( seemingly ) obvious questions, and to check in, making sure we're all on the same page. "O bvious " questions are a low risk, high reward way to add value. At worst, you'll add confidence to our actions. At best, you discover a misalignment that saves us from a dead-end. The more people, the more clear we need to be. The bigger the initiative, the bigger the risk of reaching the finish line, only to realize expectations were off. Success is always uncertain. But we can be certain about what we want and what everyone's job is. Things that can be clea
Special Purpose Acquisition Companies. A mouthful, luckily we can just call them SPACs. SPACs skyrocketed in popularity in 2020, raising over $50 billion dollars. More in a single year than in all the preceding decade.
SPACs are shell companies who's sole purpose is to raise public money to acquire a private company - thus taking it public through the backdoor. SPACs are an alternative to the traditional IPO.
IPOs can be a hassle, involving a lot of regulatory scrutiny, paperwork and hefty underwriting fees. It can take months to get everything together. SPACs sidestep all this.
SPACs are ran and operated by a sponsor. Sponsors are typically professional investors (hedge fund managers, venture capitalists) but given the recent craze, many celebrities have also entered the chat (that's always a red flag).
Investors have no idea who'll be acquired. They're betting solely on the sponsor - why they're often called "blank check" companies. Sponsors are given money on confidence alone.
Sponsors have 2 years to find a company to acquire or will have to return the money. This is good and bad. It's good in that sponsors can't just sit on the money. Bad in that it can incentive them to acquire companies that are less favourable just to close a deal. Sponsors gets 20% of the company they take public. A generous payment they wouldn't want to miss.
SPACs are a cheap and fast way for companies to go public, and are even a better deal for sponsors. For investors, the value is more questionable. Investors are choosing a mystery box. It could be great, it could be a dud. Who knows?
All investing comes with unknowns, but SPACs takes it to the next level. It's a gamble, it the truest form of the word.
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