Irrational exuberance among the retail investing community has never been more extreme, as an explosion of “blank check” companies, which are shell companies with no operations but plans to go public to acquire or merge with a private company via the proceeds of the SPAC’s initial public offering.
The SPAC game, as we recently outlined, is a “get-rich-quick” scheme, has seen issuances this year at the highest levels ever, and according to Goldman Sachs, the flurry of SPACs is yet another market top signal.
Before the 1929 crash, Joseph Kennedy Sr. was sitting in a shoeshine chair was alarmed by a shoeshine boy giving him bullish stock tips. The amateur advice given to Kennedy Sr. resulted in him dumping his stock portfolio and then shorting the market before the crash. The lesson here is that when shoeshine boys, or what we’re about to find out below: college kids, start giving stock tips, it could be time to head for the exits.
This week, college kids at the University of Pennsylvania formed a new club called “Penn Spac,” to celebrate these new financial vehicles taking private companies, such as DraftKings, Virgin Galactic, and Nikola, public this year.
Penn SPAC president and Wharton sophomore Matias Urcuyo told The Daily Pennsylvanian that he founded the investment club because his Wharton classes provided very little education on SPACs.
“I saw the lack of information we were being given on the subject from the Wharton curriculum, and I wanted to bring some knowledge and depth of expertise to the table,” Urcuyo said.
Penn SPAC plans regular meetings with its members, mainly college students, to educate them on SPAC opportunities. It will host an annual event, with speakers across a wide range of SPAC industries.
“We really want to get as many Penn students to come so everybody can come to learn about what a SPAC is,” Urcuyo said.
Urcuyo, who is creating SPAC-mania at Penn, is trying “to get the word out about the club to everybody.”
“I got a couple of classmates together who were also interested in the SPAC space, and now we have a board full of people who are extremely interested in SPACs and about 80 general members who are interested in learning more,” Urcuyo said.
Penn SPAC Board
Maybe what will pique the club’s interest is Playboy Enterprises’ attempt to go public through a blank check company.
Or better yet, how about an ETF for investing in SPACs? On Oct. 1, a brand-new ETF, SPAK, went public via the New York Stock Exchange. Its purpose: to track the performance of the “booming” SPAC market.
The timing for this college-push could be a sign of excess as Axios reports that SPAC-mania is beginning to show its first cracks, as several private equity-sponsored efforts have needed to downsize.
Cerberus yesterday shrunk the anticipated IPO for its telecom-focused SPAC from $400 million to $300 million.
Riverstone Holdings’ third SPAC yesterday raised $200 million in its IPO, after downsizing from $300 million.
H.I.G. Capital filed to raise $450 million for a SPAC in late September, but on Thursday cut the proposed size to $325 million.
MPM Capital raised $85 million for its debut SPAC Thursday, after originally filing to raise $100 million.
Hold your nose?