August 14, 2020

Everything You Need To Know About SPACs | Anuj Abrol on Venture Stories

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A SPACs (special purpose acquisition company) is a blank check company that is publicly listed. Its goal is to buy or merge with a company within 18-24 months.
- If a SPAC doesn’t buy a company within that time range, you basically just get your money back so there’s little downside
Two benefits of SPACs:
- They’re forward-looking and often have companies that may not produce a profit right now, but will produce a profit in the long-run
- SPACs allow anyone to invest in the company, unlike private companies where you need to be an angel investor or venture capitalist
From March-May 2020, more SPACs IPO’ed than traditional companies IPO’ed
- In a traditional IPO, a bank gets 3-7% while when you do a SPAC, the banks only get about 5%
Why do people want to see private companies go IPO sooner?
- 1) It forces the company to be honest and transparent about their results
  - “It forces you to be honest about how healthy your business is now, what is the direction you’re going into things” – Anuj Abrol
- 2) It allows everyday investors to get access to more investments
  - “If you’re staying private for longer, that means a lot of the growth is not necessarily being captured by the every American investor. It’s largely going to a venture capitalist.”

Anuj Abrol (@nujabrol) is the founder of Witty Wealth, a newsletter focused on sharing investment advice in an entertaining and educational manner
Host: Erik Torenberg (@eriktorenberg)

Anuj Abrol is the founder of Witty Wealth
- “Witty Wealth is a community that helps tech stock investors build confidence in their own abilities” – Anuj Abrol
  - Anuj will be using lessons he learned from evaluating startups and applying them towards tech stocks. He’ll also explain SPACs (special purpose acquisition company).
  - He’s also trying to make investing a multiplayer game where, as a community, people figure out what they want to invest in
Where are more and more young people using Robinhood and trading stocks?
- One possibility: Young kids have been given a stimulus check and are bored since sports aren’t on and they are seeking entertainment
  - Dave Portnoy from Barstool has been trading stocks live and has made it into a sport

A SPACs (special purpose acquisition company) is a blank check company that is publicly listed. Their goal is to buy or merge with a company within 18-24 months.
- If the SPAC doesn’t buy a company within that time range, you basically just get your money back so there’s little downside
Two benefits of SPACs:
- They’re forward-looking and often have companies that may not produce a profit right now, but will produce a profit in the long-run
- SPACs allow anyone to invest in the company, unlike private companies where you need to be an angel investor or venture capitalist
SPACs were created in 1992
- “SPACs do rise in popularity whenever we’re entering volatile times or in sort of a recessionary time” – Anuj Abrol
  - “Just because things are popping, it doesn’t necessarily mean it’s an inefficient market”
Chamath Palihapitiya is considered one of the revivalists of SPACs because he created a SPAC called IPO.A and then it merged with Virgin Galatic
“I think they can be a great vehicle for the future if they’re used correctly” – Anuj Abrol
- It gives regular Americans access to VC-type deals that they can invest in

From March-May 2020, more SPACs IPO’ed than traditional companies IPO’ed
- In a traditional IPO, a bank gets 3-7% while when you do a SPAC, the banks only get about 5%
In a direct listing, you aren’t necessarily raising new capital, it’s mostly just employees selling their shares
- “The most efficient pricing, is in theory, direct listing” – Anuj Abrol
  - In the middle, you have the SPAC: It’s a direct negotiation that the company does with their acquirer and they’re very clear and transparent about the price
    - The IPO is the least efficient because you have the least amount of control over the stock price
Why do people want to see private companies go IPO sooner?
- 1) It forces the company to be honest and transparent about their results
  - “It forces you to be honest about how healthy your business is now, what is the direction you’re going into things” – Anuj Abrol
- 2) It allows everyday investors to get access to more investments
  - “If you’re staying private for longer, that means a lot of the growth is not necessarily being captured by the every American investor. It’s largely going to a venture capitalist.”

Slack:
- Bull: Is an amazing product and their churn numbers are quite low
- Bear: The question is, can they beat Microsoft teams and Microsoft’s distribution advantage?
Peleton:
- Bull: Has a great brand and a cult following
- Bear: Aside from their brand, they don’t have much of a competitive moat
Zoom:
- Bull: Amazing product
- Bear: Also doesn’t have much of a competitive moat. It’s more a default option for video conferencing than the best video conference tool.