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I was literally just talking to a SPAC CEO last weekend that was in a deal with Goldman that got dropped by them. Apparently, there are regulations coming down

I was literally just talking to a SPAC CEO last weekend that was in a deal with Goldman that got dropped by them. Apparently, there are regulations coming down from the SEC and Goldman didn't want to deal with them and/or the regulations changed the profit calculus.

vmception 4y ago
Can someone explain Goldman's role? What are they underwriting? SPAC's merge with companies with capital that SPAC's already have collected. Was Goldman underwriting the formation of new SPACs when those SPACs are initially collecting money?
- bradwood 4y ago
  SPACs themselves need to float before they can make an acquisition. The investment bank provides the primary markets support for this, sets up a syndicate, and markets the spac to the institutional investor community. There may be a level of underwriting going on also, as is the case with a rights issue or IPO, but it's probably more the marketing and access to the bank's client base that the spac benefits from.
- JumpCrisscross 4y ago
  > Was Goldman underwriting the formation of new SPACs when those SPACs are initially collecting money? SPACs are chock full of fees to Wall Street. When the SPAC goes public, it pays an IPO fee. The bank, having to comply with fewer regulations than in a traditional IPO, makes a healthy profit. When the SPAC negotiates a merger it pays M&A fees. When shareholders are presented with the merger and asked to vote that comes with a fee. If there is a PIPE, there are, of course, more fees. Later, when the sponsors sell their stock, there will be brokerage fees for the block trade. And I assume, in the final stage of a SPAC’s lifecycle, there will be de-listing, liquidation and/or distressed debt fees.
  - chrisgd 4y ago
    Underwriting fees on SPACs are less than traditional IPO as it is easier to get done.
    - JumpCrisscross 4y ago
      > Underwriting fees on SPACs are less than traditional IPO as it is easier to get done True, but the margins are wider. Most of the documents are boiler plate. The same investors were buying them in comparable chunks from deal to deal. All this before the boatload of the other fees I mentioned.
  - darawk 4y ago
    This suggests a new line of business for SPACs: SPAC SPACs. A SPAC who's only purpose is to acquire and then spin out new SPACs.
    - exogenousdata 4y ago
      Sadly too late. It's called a SPARC. Huzzah! https://www.forbes.com/sites/jacobwolinsky/2021/12/16/odeys-courtenay-the-sparc-conversion-of-bill-ackmans-spac-is-a-wise-move/?sh=c3a7a471bcb2 https://www.forbes.com/sites/jacobwolinsky/2021/12/16/odeys-...
    - vmception 4y ago
      could sell shares of the management company that the sponsors come from
    - PierceJoy 4y ago
      Bundling assets, and then bundling bundles. I don’t believe that’s ever been a problem before, right?
      - vmception 4y ago
        Only if there is too much leverage and an poor accounting of who owns what The Federal Reserve bought the shitty mortgage backed securities because they werent that shitty, the banks just had too many of them relative to the size of their own assets. Even of subprime mortgages and adjustible apr mortgages only ~7% went into default by 2008-2009 A portfolio of mortgages where 93% are going to pay vastly more interest to you than the home is worth and you still have the home if they really default? Thats a good portfolio The banks issue at the time was that they were leveraged up 50x, and they didnt even realize they were levered up that much so a single month of 7% defaulting could bankrupt them While the fed has an infinite sized portfolio without leverage, and bought all the claims and let them just play out which they have continued to do. Theyre profitable, correctly performing investments. More transparent accounting fixes the problem with re-collateralized re-securitized assets
  - vmception 4y ago
    > And I assume, in the final stage of a SPAC’s lifecycle, there will be de-listing, liquidation and/or distressed debt fees. lol, are these target companies saddled with debt though? I don't think so
    - BbzzbB 4y ago
      Given the cash burn of the classic 2021 SPAC, if they're not riddled with debt yet they may well be as soon as the stock market ATM stops spitting money (which might be about now). Which reminds me OP omitted dilution/share issuance as a mechanism for banker fees.
mattbrewsbytes 4y ago
I suspect that similar to how the "market" has various things "priced in", larger financial firms want to stay ahead of regulation and essentially change their business models around ahead of regulations. I think they all operate on the principle of being first for everything is more profitable, including exiting poor investments.
- ericmay 4y ago
  The best way to think of "priced in" when you are reading something that someone else wrote is to replace those two words with "I don't know". Nothing is priced in. Everything is priced in. When someone thinks of an idea, by virtue of sharing that idea it's deemed to be "priced in".
  - totoglazer 4y ago
    No, that’s kind of nonsense.
    - ericmay 4y ago
      It’s really not. “It’s priced in” is just religion at this point and it’s really just surface level useless banter. The market is random and softly guided by macroeconomic forces. Interest rates go up and then the share price of Google goes up? Priced in. They go down and the share price goes up? Priced in. Company has a bad quarterly? Already pride in by the nefarious “market”. Etc. Recognizing things like that is a good first step toward having a coherent investment thesis.
      - aaaaaaaaata 4y ago
        > Priced in By the time you are talking about, it largely will be.
      - solveit 4y ago
        "Priced in" is not explanatory, it is predictive and the prediction is that you cannot consistently beat the market (where you are a generic smart person with no particular reason to have an edge, like most HN commenters).

vmception 4y ago

Can someone explain Goldman's role? What are they underwriting? SPAC's merge with companies with capital that SPAC's already have collected. Was Goldman underwriting the formation of new SPACs when those SPACs are initially collecting money?

bradwood 4y ago
SPACs themselves need to float before they can make an acquisition. The investment bank provides the primary markets support for this, sets up a syndicate, and markets the spac to the institutional investor community. There may be a level of underwriting going on also, as is the case with a rights issue or IPO, but it's probably more the marketing and access to the bank's client base that the spac benefits from.
JumpCrisscross 4y ago
> Was Goldman underwriting the formation of new SPACs when those SPACs are initially collecting money? SPACs are chock full of fees to Wall Street. When the SPAC goes public, it pays an IPO fee. The bank, having to comply with fewer regulations than in a traditional IPO, makes a healthy profit. When the SPAC negotiates a merger it pays M&A fees. When shareholders are presented with the merger and asked to vote that comes with a fee. If there is a PIPE, there are, of course, more fees. Later, when the sponsors sell their stock, there will be brokerage fees for the block trade. And I assume, in the final stage of a SPAC’s lifecycle, there will be de-listing, liquidation and/or distressed debt fees.
- chrisgd 4y ago
  Underwriting fees on SPACs are less than traditional IPO as it is easier to get done.
  - JumpCrisscross 4y ago
    > Underwriting fees on SPACs are less than traditional IPO as it is easier to get done True, but the margins are wider. Most of the documents are boiler plate. The same investors were buying them in comparable chunks from deal to deal. All this before the boatload of the other fees I mentioned.
- darawk 4y ago
  This suggests a new line of business for SPACs: SPAC SPACs. A SPAC who's only purpose is to acquire and then spin out new SPACs.
  - exogenousdata 4y ago
    Sadly too late. It's called a SPARC. Huzzah! https://www.forbes.com/sites/jacobwolinsky/2021/12/16/odeys-courtenay-the-sparc-conversion-of-bill-ackmans-spac-is-a-wise-move/?sh=c3a7a471bcb2 https://www.forbes.com/sites/jacobwolinsky/2021/12/16/odeys-...
  - vmception 4y ago
    could sell shares of the management company that the sponsors come from
  - PierceJoy 4y ago
    Bundling assets, and then bundling bundles. I don’t believe that’s ever been a problem before, right?
    - vmception 4y ago
      Only if there is too much leverage and an poor accounting of who owns what The Federal Reserve bought the shitty mortgage backed securities because they werent that shitty, the banks just had too many of them relative to the size of their own assets. Even of subprime mortgages and adjustible apr mortgages only ~7% went into default by 2008-2009 A portfolio of mortgages where 93% are going to pay vastly more interest to you than the home is worth and you still have the home if they really default? Thats a good portfolio The banks issue at the time was that they were leveraged up 50x, and they didnt even realize they were levered up that much so a single month of 7% defaulting could bankrupt them While the fed has an infinite sized portfolio without leverage, and bought all the claims and let them just play out which they have continued to do. Theyre profitable, correctly performing investments. More transparent accounting fixes the problem with re-collateralized re-securitized assets
- vmception 4y ago
  > And I assume, in the final stage of a SPAC’s lifecycle, there will be de-listing, liquidation and/or distressed debt fees. lol, are these target companies saddled with debt though? I don't think so
  - BbzzbB 4y ago
    Given the cash burn of the classic 2021 SPAC, if they're not riddled with debt yet they may well be as soon as the stock market ATM stops spitting money (which might be about now). Which reminds me OP omitted dilution/share issuance as a mechanism for banker fees.

mattbrewsbytes 4y ago

I suspect that similar to how the "market" has various things "priced in", larger financial firms want to stay ahead of regulation and essentially change their business models around ahead of regulations. I think they all operate on the principle of being first for everything is more profitable, including exiting poor investments.

ericmay 4y ago
The best way to think of "priced in" when you are reading something that someone else wrote is to replace those two words with "I don't know". Nothing is priced in. Everything is priced in. When someone thinks of an idea, by virtue of sharing that idea it's deemed to be "priced in".
- totoglazer 4y ago
  No, that’s kind of nonsense.
  - ericmay 4y ago
    It’s really not. “It’s priced in” is just religion at this point and it’s really just surface level useless banter. The market is random and softly guided by macroeconomic forces. Interest rates go up and then the share price of Google goes up? Priced in. They go down and the share price goes up? Priced in. Company has a bad quarterly? Already pride in by the nefarious “market”. Etc. Recognizing things like that is a good first step toward having a coherent investment thesis.
    - aaaaaaaaata 4y ago
      > Priced in By the time you are talking about, it largely will be.
    - solveit 4y ago
      "Priced in" is not explanatory, it is predictive and the prediction is that you cannot consistently beat the market (where you are a generic smart person with no particular reason to have an edge, like most HN commenters).