SPACs: Minding The Gap while offering the “little guys” greater control over their investment choices and decisions.
SPACs as an investment vehicle have been around for a very long time, going back to the 1990s. Next time you are juicing it up at Jamba Juice or driving through Burger King, think SPAC!
Can a relatively underdog SPAC industry that has raised almost $800 Billion in 2020 be quietly democratizing the investing world?
SPAC IPOs & Mergers are rapidly taking hundreds of companies public — businesses that need extra capital to expand or that are otherwise struggling to raise enough money in the private markets.
Currently, the Fed has pumped a massive amount of liquidity into the financial markets through fiscal stimulus to combat a pandemic. This has fueled a simmering need for the over-heated stock market to release some steam and find healthy ways to spread its valuations out over more companies that can all together help grow and innovate the economy. In our view, that is what makes SPACs a good thing for the market — they help put excess money back into the economy through the growth of solid businesses that are expected to transform the world and our future. After all, the stock market was originally designed to do just that — mass participation and crowd funding of good businesses on Main Street!
SPACs allows companies that normally would not go public due to the time and cost constraints of traditional IPOs to tap liquid markets to raise capital to grow. SPACs lessen uncertainty for businesses and provide flexibility of a timely exit to investors. SPACs also allow retail investors that normally could not participate in Private Equity or Venture Capital deals to get access to companies with good growth potential. Individual investors in the public markets can tap into emerging companies and industries at the early, potentially lucrative pre-IPO stage of SPACs. And these new investors are seeking and finding opportunities of growth that typically would have occurred, slurped up and consumed before a traditional IPO release happens.
The current wave of SPACs are being put up by Sponsors that are risking their capital in order to find good companies to De-SPAC (merge or buy in financial parlance.) The SEC places very strict onus on the Sponsors to do solid due-diligence in order to protect the public. Don’t think that the SEC doesn’t regulates this segment very closely! It ensures that before a SPAC raises any money, the Sponsors have gone through background checks, a rigorous filing and raised capital through registered institutional investors. Third-parties value and underwrite the ndeals. Nasdaq’s Reg D has also hugely advanced investor protections in the decades since the dot-com era of pipe dreams versus the market we are seeing today of real businesses with a vision for innovation, strong financials, and track record of execution.
As SPAC Sponsors, we are not only efficiently bringing exceptional businesses with strong, audited financials to market where the public can contribute and participate in its success — but we are also creatively consolidating capital of many new pre-IPO investors who go way beyond tight inner circles of wealth. We essentially bring together those who have the deep understanding, desire, and appropriate risk appetite to invest in our vision.
We won’t level the steeply tilted playing field of the investing world overnight. However, over time, one investor at a time, one deal at a time, we will give new and more investors coveted access. One De-SPAC at a time, we will together help many more businesses get liquidity, potential equity upside, and the public funding premium they need to take off swiftly.
We are fellow stakeholders, so we take our role in the democratization of the investing world seriously as one of our 4 Vs or values.
Before we De-SPAC a company, we also do extensive due-diligence, vetting of potential suitors, and exhaustive readiness tests. Alongside our world-leading and seasoned Board Members and Management Teams at the helm, we strive to execute on the best deals we can find. We make sure we weigh the goals, pros, cons, risks, trade-offs, alignments and adaptabilities of each transaction — keeping ourselves realistic and practical about every deal’s public market potential and expectations.
Last but not least, we are passionate about reducing the individual investor risks. How?
For one, our SPACs are strategically launched to focus on specific and promising industries and sectors such as Bio Tech, Alt Energy as well as new combination trends such as Infra Tech or Prop Tech. By having target mergers in mind before our SPAC lists, we try our best to not let your money (or ours) sit idle because that is exactly what contributes to toppy, frothy markets that we have no interest in fueling. If we can help others (and ourselves) not miss other investing opportunities, then so be it — we do our best to go to market with a merger without wasting time. We also strive to structure our SPACs to better align the interests of sponsors and investors.
Our ultimate goal as a Private Equity firm with Heart is to fill the huge void that exists between the private equity market and the IPO market, and to contribute to the most vibrant public market that contributes capital to meaningful and sustainable enterprises.
If we can utilize SPACs to:
- increase the number of publicly listed companies in the US,
- increase the number of smaller businesses i.e. lower market cap stocks in the US, and
- provide individual retail investors direct access to private markets (where such access is typically coveted by a tight inner circle)
then perhaps …
By putting a private equity type investment into a public wrapper, we are democratizing 3 markets: the Private Equity market, the IPO market, and the growing gap in between the two that the SPAC market fills.
We couldn’t be more excited to:
- be a part of the narrative that democratizes the stock market and increases participation in the investing world,
- bring needed innovation to the public early,
- let the public choose to invest in the companies of tomorrow — today — or not.