The Laps & Gaps Podcast

Introduction to Special Purpose Acquisition Companies (SPACs)<br /><br />Basil: [00:00:00] Welcome to Laps and Gaps, a podcast between two friends, discussing topics and finance. I'm Basil, a mid-cap, public markets investor. Jack will be joining us in a moment and leading the discussion today. He is a private markets investor. <br /><br />Today we'll be talking about SPACs and de-SPACs. I hope you enjoy, this, our first show.<br /><br />MC: [00:00:20] The content presented here only reflects the opinions of those presenting at the time of their conversation. It may not reflect their current views nor does it reflect the views of any institution they represent. Information presented may contain factual errors. Any opinion presented should be considered for informational purposes and not be relied upon in any investment decision. The opinions expressed by any host or guest should not be considered legal or investment advice, nor should they be used to evaluate any investment or security. The content is not directed at any investor or potential investor in any Fund or for any Firm. Clients of those presenting on this may hold investments mentioned and may have different investment goals from your own.<br /><br />Jack: [00:00:58] So one of the things that you brought up in a recent conversation Basil was, a SPAC. And you can tell me what SPAC stands for ? If you could help me connect the dots, from, a four letter acronym, which, you know, as a medical, I love, to them why we want to care about this at a deeper level. Can you give me a little bit of detail on kind of what you think is happening currently in the market? <br /><br />Basil: [00:01:20] Sure. So SPAC is a special purpose acquisition vehicle. They're popular today. They've been popular for the past couple full of months, maybe past couple of years, but they've become very popular in the past six months, Typically they're used as, a, company, with no assets and no operating business does an IPO to raise a bunch of cash, that vehicle, or that company then goes and buys a private company and in, so doing takes that private company, public. I would argue that, the vehicle, the SPAC opportunity, that way of going public will be with us forever.<br /><br />I frankly heard about this, when I was in college and I heard about it with a very small company. I didn't really understand what the benefits of it were. So it's been in the ether for 20 years. But more recently, now we're talking about hundreds of millions of dollars, or billions of dollars or a billion dollars - I think is probably the largest one at this point. Taking companies public by way of SPAC. <br /><br />Jack: [00:02:21] It sounds like they're largely an entity that you can list, raise capital against, you've seen them used in a wide variety of fronts; They've been used for experienced management teams, looking for assets to buy and build, or in now the way I want you to talk about it, which is one that's been more prevalent in the press recently has been the actual taking of a growth business or a venture backed business, let's say, and actually allowing it to enter the market through a non-traditional pathway. <br /><br />The one that everybody's familiar with is the IPO or the initial public offering, you traditionally file your S1 you go on a road show, you meet investors, you price that with those investors ahead of the launch of the, you set a price, the market price is set before you launch and a SPAC approaches this differently. And it's being utilized as a mechanism so can you talk a little bit about the differences of the two of those and how you think about it from an investment point of view, as well as from an information sharing point of view. <br /><br />Basil: [00:03:21] Sure. From the, if we go to the IPO process, it's essentially a bank takes a management team to a couple of cities, meeting both privately and in large ballrooms, with potential institutional investors.<br /><br />But so you get the public filing