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The top of this cycle for ASX200, cash is king ?


kahuna1

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So, are we looking at one last desperate run up on the US markets to give the big guys a chance to reduce and lock in obscene profits?

Or will the indexes just keep rising ....... can’t happen !! Watching with some fascination.

 

Cheers

J

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One of the trends in US financial circles that I have only begun to take notice of is the creation of SPAC's, or Special Purpose Acquisition Company. These are not to be confused with that other US creation called SPAC, or Super Political Action Comittee.

They are probably both as corrupt as each other, but that is another story.

From CNBC

A special purpose acquisitions company is essentially a shell company set up by investors with the sole purpose of raising money through an IPO to eventually acquire another company.

 

For instance, Diamond Eagle Acquisition Corp. was set up in 2019 and went public as a SPAC that December. It then announced a merger with DraftKings and gambling tech platform SBTech. DraftKings began trading as a public company when the deal closed in April.

 

So a SPAC has no commercial operations — it makes no products and does not sell anything. In fact, the SPAC’s only assets are typically the money raised in its own IPO, according to the SEC.

 

Usually a SPAC is created, or sponsored, by a team of institutional investors, Wall Street professionals from the world of private equity or hedge funds, while even high-profile CEOs like Richard Branson and fellow billionaire Tilman Fertitta have jumped on the trend and formed their own SPACs.

 

From The SPACtacle

The special-purpose acquisition company (SPAC) craze that started last year is showing no signs of abating, with sponsors of the so-called blank-check companies raising record sums of money so far this year. Investors put $32 billion in new SPACs in February, the largest month of issuance on record. The total of $123 billion raised by blank-check companies in the first two months of 2021 is just under $30 billion short of 2020’s full-year total, according to a recent Goldman Sachs Research note.

And SPAC sponsors are getting more ambitious, targeting larger companies to take public than usual. The amount of activity in the space has raised eyebrows among regulators, some of whom allege that the vehicles lack transparency. Others call it a bubble.

 

In reality, it’s more a way of reintroducing risks that regulators have taken off the table. The IPO process is long and arduous and requires reams of legal documents and fairness opinions. The laws surrounding IPOs mean that investment banks and lawyers tend to take public companies that have proven track records, while riskier companies are kept private. The much-derided “IPO pop†is partially a result of the risk aversion embedded into the IPO process. SPACs, on the other hand, segregate risks among different parties, and facilitate the public listing of earlier-stage companies.

 

When a SPAC gets listed, it sells shares for $10 and promises to use the proceeds to merge with a private company. The shareholders can then exchange their SPAC shares for shares in the new company, or ask for $10 back. Each share also carries a warrant that allows investors to buy an additional share at $11.50 after the merger.

The above article is worth a read as it explains who gets what out of this scheme, and how it bypasses many regulations.

Which brings me to the third part of this speech.

In the same way that viewers have spurned Sports and academy awards broadcasts for their overtly one sided political interferences, it seems that investors have spurned overtly political investor schemes.

Colin Kaepernick who started the taking the knee craze and has become the lightning rod for racism in sport and life in general , became major league sponsor for an SPAC called Mission Advancement.

After raisng $300million, shares of the blank-check firm, which boasts of a board made up entirely of “Black, Indigenous and people of color,†were flat at $10.01 at 12:42 p.m. Wednesday.

According to Bloomberg, the company, which is in part run by Jahm Najafi, who heads private-equity firm Najafi Companies, sold 30 million units for $10 apiece Tuesday. Najafi and Kaepernick will "focus on diversity issues and racial justice" and aim to acquire a consumer company with an enterprise value around $1 billion.

At least on its first day of trading, the market is less than excited about the possibility.

It seems the market has little faith in the business acumen of ports stars.

As Bloomberg also notes, today's debut for Kaepernick’s SPAC marked the second former-professional athlete-backed blank check company to go public in the last 10 days. Former Yankee all-star Alex Rodriguez’s Slam Corp. rose 5.1% in its first day of trading on Feb. 23, but has since trimmed gains to just 0.9%.

 

Never let politcs, religion, or sport get in the way of making a buck.

 

Mick

 

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