Startup chief executives are turning a cold shoulder to SPACs....So-called blank-check companies, which go public with no assets and then merge with private companies, exploded in popularity last year as a mechanism for startups to raise a lot of money with more speed and fewer regulatory hurdles than a traditional initial public offering.
More recently, startup CEOs have watched many of their peers endure stock slides and earnings calls with disappointed investors in the weeks after finishing a SPAC deal. For many, it has been a bitter reality check that public-market investors might not be as generous as SPAC creators have been with early-stage companies with unpredictable revenue and growing pains.
Did these clowns think that just because they took a trendy shortcut to going public that investors would automatically fall in love with them? That lousy earnings growth or missed targets would be cheerfully ignored? What galaxy are they from?
A word to the wise: Once you're public, you're public. If you don't perform, you get hammered. End of story.
In fairness, the supply side of investment in startups is just absolutely crazy right now. There was a good piece a while back that featured a bunch of VC people complaining that Hedge Funds had air-dropped into the market and were just throwing in huge valuations and investments with little oversight.
Maybe they figured that SPACs would be a good way of getting in on that (plus whoever brokers the SPAC gets a nice fee).
Seems like the right play is to execute a SPAC deal and then pay out all of the cash to the employees as a bonus. Takes a lot of the risk out of the stock valuation post IPO for the employees, and lets them exercise their options without bankrupting themselves.
If you want to have an IPO generate the most money for the company, than you'd probably want a Dutch Auction. The problem with those is that there is typically no post IPO jump, press that comes with that price jump, and stock options for the executives are not as lucrative. So they are not popular. The question, though, is do they work? Not sure. Are there enough people to be able to accurately price a company who will participate in a "OpenIPO"?
If people are buying into IPO's or SPAC's--do they know enough about the company to judge by themselves the value and the risk? Sometimes I have trouble seeing the difference between market investments and gambling.
Except Tesla. Cults beat everything.