WEBVTT - Why Blank Check Companies Are The Hottest Thing This Year 0:00:10.800 --> 0:00:14.240 Hello, and welcome to another episode of the Odd Thoughts podcast. 0:00:14.320 --> 0:00:19.239 I'm Tracy Allaway and I'm Joe Wisenthal. Joe, you've heard 0:00:19.239 --> 0:00:23.759 of SPACs, right, Yeah, I absolutely I've heard of them. Um, 0:00:23.800 --> 0:00:25.800 you know, I've heard about them for a while, so 0:00:25.920 --> 0:00:30.000 called blank check companies, but they've definitely been one of 0:00:30.040 --> 0:00:34.479 the big stories of especially in the last couple of months. Right. 0:00:34.520 --> 0:00:37.120 And for those that don't know, SPAC stands for a 0:00:37.159 --> 0:00:42.880 special purpose acquisition company and they're basically these blank check firms, 0:00:43.320 --> 0:00:48.479 shell companies that set out to buy other companies, uh 0:00:48.520 --> 0:00:50.960 and make money off of them. And it's a way 0:00:51.040 --> 0:00:54.280 for people to get involved with those companies without the 0:00:54.320 --> 0:00:59.520 company's actually having to i p O in the public market. Right. 0:00:59.680 --> 0:01:03.840 And the interesting thing is that the SPAC is public 0:01:03.920 --> 0:01:06.000 right away, so the SPACK does the i p O. 0:01:06.800 --> 0:01:09.320 It trades and so of course there's always a lot 0:01:09.360 --> 0:01:11.839 of you know, there's venture capital, and there's private equity. 0:01:11.880 --> 0:01:16.000 There's always companies that are financial companies that are buying 0:01:16.040 --> 0:01:18.959 other companies. But this is a situation in which the 0:01:19.280 --> 0:01:24.000 buyer the show goes public, it raises money in that offering, 0:01:24.520 --> 0:01:26.840 and then it goes out in search of an actual 0:01:26.880 --> 0:01:30.360 real business to buy, right, so you're sort of pre 0:01:30.560 --> 0:01:34.360 funding acquisitions and you don't know what they are going 0:01:34.400 --> 0:01:38.240 to be exactly. Now, the funny thing about SPACs is like, 0:01:38.440 --> 0:01:43.000 I don't remember that much about them before two I 0:01:43.000 --> 0:01:45.200 don't know why, but apparently that was the last time 0:01:45.240 --> 0:01:48.840 that everyone was talking about spacts, Right, Well, I think 0:01:48.880 --> 0:01:53.080 that's right, And I think that they do historically have 0:01:53.280 --> 0:01:56.720 this reputation because of you know, when you hear like 0:01:56.800 --> 0:01:59.800 blank check company, you hear like blank check that typically 0:01:59.800 --> 0:02:03.320 does that have like historically great connotations and anything, But 0:02:03.400 --> 0:02:05.440 you hear like blank check company, and it's like, wait, 0:02:05.680 --> 0:02:08.440 I'm handing money over to this company and I have 0:02:08.560 --> 0:02:10.440 no idea what they're going to do with it except 0:02:10.480 --> 0:02:12.440 that I hope they're going to make a good acquisition. 0:02:13.120 --> 0:02:17.040 So historically I think they have sort of a questionable reputation, 0:02:17.160 --> 0:02:20.400 although part of our discussion today is is that changing. 0:02:20.800 --> 0:02:23.720 But it also tends to be the case that they're 0:02:23.760 --> 0:02:29.040 associated with periods of you know, boom speculative speculative periods, 0:02:29.080 --> 0:02:32.000 and so you mentioned the pre crisis period, last crisis, 0:02:32.000 --> 0:02:35.320 and of course you mentioned now and you know, historically 0:02:35.320 --> 0:02:39.520 they do seem to be associated with periods of speculative 0:02:39.560 --> 0:02:43.840 appetite show we say, yeah, exactly. I mean the term 0:02:43.960 --> 0:02:46.840 blank check company kind of screens too much money in 0:02:46.840 --> 0:02:50.600 the system, doesn't it um, But you're exactly right. That's 0:02:50.600 --> 0:02:54.160 the big debate. Now. We saw lots of SPACs before 0:02:54.280 --> 0:02:56.800 the two thousand eight financial crisis kind of kicked the 0:02:56.840 --> 0:02:59.600 air out of the market's tires, and now spacts are 0:02:59.639 --> 0:03:03.160 coming ac. I think so far in we've had over 0:03:03.480 --> 0:03:07.680 sixty five deals for something like twenty four billion dollars. 0:03:07.720 --> 0:03:11.440 Everyone is talking about them. There's all types of different structures, 0:03:11.440 --> 0:03:15.040 some are more controversial than others. But the big question 0:03:15.240 --> 0:03:18.040 is is this a sign of some sort of excess 0:03:18.080 --> 0:03:22.640 in the market. Are we actually protecting investors through these structures, 0:03:22.760 --> 0:03:26.679 or is this a way to funnel money to sponsors 0:03:26.880 --> 0:03:31.280 or corporate owners. So today we are going to dig 0:03:31.400 --> 0:03:35.040 into all of those questions. Uh, And I'm really excited 0:03:35.080 --> 0:03:39.520 to say we have Kelly driscoll. She's a board director 0:03:39.560 --> 0:03:44.480 at a spack called Fusion Acquisition Cores. She's also a 0:03:44.520 --> 0:03:48.360 long time executive over at State Street Global Advisers, so 0:03:48.400 --> 0:03:50.440 we're really happy to have her on. Kelly, Welcome to 0:03:50.480 --> 0:03:53.000 all thoughts, Thank you. It's a pleasure to be here 0:03:53.040 --> 0:03:56.920 with you today. So Kelly, maybe just to begin with, 0:03:57.480 --> 0:04:01.240 could we could we maybe discuss why ice bacts are 0:04:01.440 --> 0:04:07.320 experiencing this resurgence now, why now at this moment? Sure, 0:04:07.360 --> 0:04:09.960 I think the big wine now is the volatility in 0:04:09.960 --> 0:04:14.560 the market. So certainly with the coronavirus and here in 0:04:14.600 --> 0:04:20.440 the US the uncertainty around the upcoming elections, there's incredible volatility, 0:04:20.520 --> 0:04:24.159 which tends to be puts a damper on traditional I 0:04:24.320 --> 0:04:28.000 p o s with that much volatility, and so SPACs 0:04:28.120 --> 0:04:30.880 are an alternative to I p o s. It's a 0:04:30.880 --> 0:04:36.480 way for private companies to basically go public by being acquired, 0:04:37.040 --> 0:04:39.880 as Joe had mentioned, by a spect that is already 0:04:39.920 --> 0:04:45.280 publicly traded. And two, go back to some of the 0:04:45.320 --> 0:04:48.320 comments that you made on the evolution. You're absolutely right 0:04:48.400 --> 0:04:52.000 that one of the reasons they you maybe haven't heard 0:04:52.000 --> 0:04:56.600 of them, you know, since the early two thousands, is 0:04:56.880 --> 0:04:59.920 because that's when they got to got to receive the 0:05:00.080 --> 0:05:05.440 lot of mixed reactions and had some mixed reputations in 0:05:05.480 --> 0:05:09.120 the marketplace. But there were some regulatory and listing changes 0:05:09.240 --> 0:05:13.560 in two thousand eleven. The regulations made it easier to 0:05:13.600 --> 0:05:17.160 approve acquisitions because the acquisitions in the end have to 0:05:17.200 --> 0:05:20.320 be approved by the shareholders of this back. And then 0:05:20.360 --> 0:05:24.400 in two thousand seventeen, the New York Stock Exchange revised 0:05:24.440 --> 0:05:29.320 its listing requirements to mirror nasdex requirements. So you saw 0:05:29.720 --> 0:05:33.680 more SPACs listing on the New York Stock Exchange. But 0:05:34.200 --> 0:05:37.400 kind of going to what you said, why why now? 0:05:37.480 --> 0:05:40.600 Why so much? Because the I p O, the traditional 0:05:40.640 --> 0:05:43.880 I p O market has really not closed down, but 0:05:43.920 --> 0:05:46.760 there's been such a damper on it that, uh, companies 0:05:46.800 --> 0:05:50.600 looking to go public or looking for alternative alternative vehicles. 0:05:52.279 --> 0:05:54.120 I want to dig into that. There's so much I 0:05:54.120 --> 0:05:56.919 want to dig into, but let's just start with for 0:05:57.040 --> 0:06:03.200 people unfamiliar with the sort of simple will structural governance 0:06:03.440 --> 0:06:08.880 mechanics of how it works, the fundraising process, why people 0:06:09.520 --> 0:06:14.599 agree to lock up money with a management team, the 0:06:14.720 --> 0:06:18.480 obligation on that management team, and then how that decision 0:06:18.960 --> 0:06:23.520 comes to in terms of selecting a company to essentially buyout, 0:06:23.560 --> 0:06:27.719 just like sort of walk through the basic spack steps. Sure, 0:06:27.880 --> 0:06:31.359 so basically you start with a sponsor who decides that 0:06:31.440 --> 0:06:35.039 they really want to set up a spack and they 0:06:35.080 --> 0:06:38.560 basically get what we call founders shares or what sometimes 0:06:38.600 --> 0:06:41.479 it's referred to as the sponsor promote, so they have 0:06:41.800 --> 0:06:44.280 founder shares in the spack. Those are the first years 0:06:44.320 --> 0:06:48.440 that come in and then they file an S one. 0:06:48.600 --> 0:06:51.440 They go through the steps of having the spack go 0:06:51.720 --> 0:06:56.920 public um with the traditional underwriter. The units are then 0:06:57.080 --> 0:07:02.440 offered in in an underwriting and they typically are offered 0:07:02.440 --> 0:07:05.640 it ten dollars a unit. We can talk about Acman's 0:07:06.480 --> 0:07:09.800 It's back later on, but the typical structures they're offered 0:07:09.800 --> 0:07:15.280 a ten dollars unit. The public has, including retail investors, 0:07:15.320 --> 0:07:19.880 have the ability to buy those public shares, and excuse me. 0:07:19.960 --> 0:07:24.200 Usually the units consist of a share and a fraction 0:07:24.200 --> 0:07:27.960 of a warrant, so and the warrants are typically exercisable 0:07:28.160 --> 0:07:31.400 at above the I p O price, so eleven dollars 0:07:31.400 --> 0:07:35.200 and fifty cents. So that's the structure, if you will. 0:07:35.640 --> 0:07:40.640 The reason somebody might invest is because, uh, as you know, 0:07:40.680 --> 0:07:43.360 in a traditional I p O it's very hard to 0:07:43.400 --> 0:07:46.440 get an allocation in an I p O. So retail 0:07:46.520 --> 0:07:50.280 investors can invest in a spack. The money raised in 0:07:50.320 --> 0:07:53.240 that I p O goes into a trust. So there's 0:07:53.280 --> 0:07:58.240 some downside for investors. The trust holds the cash until 0:07:58.760 --> 0:08:05.880 the spack back with a merger acquisition and puts it 0:08:05.960 --> 0:08:10.560 to the shareholders. That the shareholders don't like the acquisition, 0:08:10.600 --> 0:08:14.200 they can uh, they can say I want my money back, 0:08:14.480 --> 0:08:16.720 They can redeem their shares. Even if they vote for 0:08:16.720 --> 0:08:19.800 the acquisition, they still have the ability to deem their shares, 0:08:20.360 --> 0:08:25.560 so you can. Spact provides some downside up until the 0:08:25.600 --> 0:08:30.240 time of the business combination. And you're right, Joe, that 0:08:30.240 --> 0:08:33.840 that that you're kind of locking your money in for 0:08:33.880 --> 0:08:38.360 a period of time until the SPAC sponsors find find 0:08:38.400 --> 0:08:44.479 the right opportunity and present the acquisition merger to the shareholders. 0:08:45.400 --> 0:08:49.719 You mentioned the initial sort of SPACK investors also get 0:08:49.760 --> 0:08:52.960 a warrant, so a right to buy further shares of 0:08:52.960 --> 0:08:56.120 the company at slightly above the offering price. Is that 0:08:56.240 --> 0:08:59.079 sort of like a compensation for the sort of time 0:08:59.160 --> 0:09:02.640 value of my of locking your money up while the 0:09:02.920 --> 0:09:06.800 board or while the well the additional sponsors could spend 0:09:06.880 --> 0:09:09.600 up to two years looking for a company. Yeah, and 0:09:09.679 --> 0:09:13.800 that I think, as as you say, it gives um investors, 0:09:13.840 --> 0:09:17.120 you know, more potential upside if the business that they 0:09:17.160 --> 0:09:20.360 have acquired does well over the over the long run, 0:09:20.640 --> 0:09:41.160 so they get a little more upside. So you mentioned 0:09:41.200 --> 0:09:44.040 why investors might be interested in the structure. It gives 0:09:44.080 --> 0:09:47.000 them companies that might be otherwise very difficult for them 0:09:47.040 --> 0:09:49.640 to have access to, especially in an I p O 0:09:49.760 --> 0:09:53.240 process where you know, the initial allotments are going to 0:09:53.360 --> 0:09:57.040 go to very big investors like you know, mutual funds 0:09:57.240 --> 0:10:01.040 UM And you mentioned the role of the sponsors, and 0:10:01.120 --> 0:10:05.680 you know, sponsors get these sponsors shares and most of 0:10:05.679 --> 0:10:09.160 them seem to be well compensated for their role in 0:10:09.200 --> 0:10:12.120 these companies. But what's in it? What's in it for 0:10:12.160 --> 0:10:15.320 a company that is being bought by a spack or 0:10:15.320 --> 0:10:18.839 a company that is reverse merging into a spack, why 0:10:18.840 --> 0:10:21.240 do they do it instead of doing an I p 0:10:21.400 --> 0:10:24.840 O for instance. Well, that's a good question really for 0:10:24.880 --> 0:10:29.600 the target business and its owners. One if you look 0:10:29.640 --> 0:10:32.160 at today's market, it's the ability to go public during 0:10:32.200 --> 0:10:36.920 periods of market instability, so you have access to public capital. 0:10:37.640 --> 0:10:39.960 You can raise money to fund growth or raise money 0:10:39.960 --> 0:10:43.400 to fund your operations, and you can do it with 0:10:43.520 --> 0:10:48.600 much more certainty. So SPACs, once the spack identifies the 0:10:48.679 --> 0:10:51.920 target and starts having negotiations with the target, it's a 0:10:51.960 --> 0:10:56.800 negotiated deal. So the target business the business owners have 0:10:57.040 --> 0:11:02.840 much more say in the str ructure of of the 0:11:03.160 --> 0:11:08.200 company going forward, how much of their equity investment are 0:11:08.200 --> 0:11:11.440 they willing to roll into the company, what's the price 0:11:11.679 --> 0:11:13.760 so you know they usually in a traditional I p 0:11:13.880 --> 0:11:17.720 O there's really no no ability to negotiate price. So 0:11:17.760 --> 0:11:20.160 it's all a bit of a negotiation with a SPAC, 0:11:20.280 --> 0:11:23.800 which can be very comforting to a company that's going 0:11:23.800 --> 0:11:28.000 to go public, and the other sort of big benefit 0:11:28.160 --> 0:11:33.640 for the target businesses. You can include financial projections which 0:11:33.640 --> 0:11:37.079 you can't do in a traditional I p O. So 0:11:37.320 --> 0:11:42.040 in the proxy statement that goes to the SPAC shareholders 0:11:42.120 --> 0:11:45.000 to vote on the deal, whether they want to prove 0:11:45.040 --> 0:11:47.840 the deal, whether they want to get their money back. Uh, 0:11:47.880 --> 0:11:53.400 that can include financial projections and forward looking statements, which 0:11:53.520 --> 0:11:55.719 is not allowed in a traditional I PO. So when 0:11:55.720 --> 0:11:58.559 you look at some of the sort of larger if 0:11:58.559 --> 0:12:01.760 you look at some virgin lactic or draftings, it gave 0:12:01.840 --> 0:12:05.680 them the ability to show what the company is going 0:12:05.720 --> 0:12:08.599 to look like or might look like over sort of 0:12:08.679 --> 0:12:11.560 multi year projections. Right. So this is where I have 0:12:11.720 --> 0:12:14.199 to like ask like a sort of like cynical question 0:12:14.280 --> 0:12:17.679 because you say that you know, this is a volatile market, 0:12:18.040 --> 0:12:20.920 and so SPACs offer another route to go in public. 0:12:21.000 --> 0:12:24.400 But on the other hand, this is one some people 0:12:24.480 --> 0:12:26.280 might say this is a volatile market. But another way 0:12:26.280 --> 0:12:28.120 to say that is that this is a sort of 0:12:28.120 --> 0:12:31.640 euphoric market and that if you're a company that was 0:12:31.679 --> 0:12:36.400 in enterprise software or cloud software or autonomous vehicle tech, 0:12:36.720 --> 0:12:42.080 there's extraordinary demand in this market um for equity issuance. 0:12:42.120 --> 0:12:47.720 And so is it really about, Okay, this is a 0:12:47.720 --> 0:12:50.560 path to the market in a market that maybe doesn't 0:12:50.559 --> 0:12:52.959 have the appetite, or is it about there's a bunch 0:12:53.000 --> 0:12:56.800 of people that are pouring money into speculative. That's a 0:12:56.880 --> 0:12:59.120 lot of retail money in this market. I mean, that's 0:12:59.120 --> 0:13:02.200 been one of the extraordinary stories of and if you like, 0:13:02.480 --> 0:13:04.560 I want to like sort of tap some of that 0:13:04.760 --> 0:13:07.400 retail money, and you want to be able to give 0:13:07.520 --> 0:13:10.720 projections which you can't do in an s one UM 0:13:10.760 --> 0:13:13.360 and say here's our hockey stick growth about you know, 0:13:13.440 --> 0:13:17.280 our total addressable market for autonomous vehicle tech going out 0:13:17.320 --> 0:13:21.840 to the year that this is sort of an easy 0:13:21.920 --> 0:13:27.560 way to get um less sophisticated money. I actually think 0:13:27.559 --> 0:13:29.559 it is a little bit of both. So I do 0:13:29.679 --> 0:13:31.960 think when you look at the spack market right now. 0:13:32.000 --> 0:13:35.560 I know Tracy mentioned the numbers which day to day 0:13:35.720 --> 0:13:39.840 are are changing because there's so many specs. So I 0:13:39.840 --> 0:13:43.319 think the numbers are now you know, over thirty billion 0:13:43.360 --> 0:13:46.920 of capital raised by specs over seventy I p o 0:13:47.040 --> 0:13:50.360 s by SPACs. That compares to thirteen point six billion 0:13:50.440 --> 0:13:54.120 raised by fifty nine packs in ten And the average 0:13:54.160 --> 0:13:57.959 size of SPACs has grown just since last year. So 0:13:58.360 --> 0:14:01.160 I would say if you look at the numbers, particularly 0:14:01.280 --> 0:14:05.240 in July and August, uh, it's not just a hot 0:14:05.280 --> 0:14:09.360 market but arguably somewhat overheated. So there's been such a 0:14:09.360 --> 0:14:12.520 flood of new SPACs on the market. And as you say, 0:14:13.040 --> 0:14:18.400 looking for a lot, looking for technology place. So what 0:14:18.920 --> 0:14:23.120 where is there going to be substantial growth? Uh? In 0:14:23.280 --> 0:14:26.680 a private company that we can bring to the public market. 0:14:26.880 --> 0:14:30.560 And and yes, the the investors in this back are 0:14:30.600 --> 0:14:35.320 really betting on this SPAC management team, this back board 0:14:35.360 --> 0:14:39.760 and management team to bring a high quality and in 0:14:39.800 --> 0:14:43.960 most cases they're looking for a high growth company that 0:14:44.040 --> 0:14:47.760 they can bring to market. Um to Joe's point, can 0:14:47.800 --> 0:14:50.880 you talk a little bit more about the differences in 0:14:51.440 --> 0:14:56.160 pricing or valuing companies in a SPACK structure versus a 0:14:56.240 --> 0:14:59.240 traditional I p O process. So when I think of 0:14:59.280 --> 0:15:02.840 an I p O, there's sort of this whole ecosystem 0:15:02.880 --> 0:15:07.120 of people, you know, the underwriters, the potential investors. There's 0:15:07.760 --> 0:15:12.120 consensus building around the valuation. As you mentioned, no one 0:15:12.160 --> 0:15:15.000 really knows what it's going to be until it lists 0:15:15.040 --> 0:15:18.560 and then it starts trading, and usually people are expecting 0:15:18.640 --> 0:15:21.840 that first day pop and the criticism of that is 0:15:21.880 --> 0:15:24.640 that it means that the company itself has left money 0:15:24.680 --> 0:15:28.160 on the table. But the SPACK process is much more 0:15:28.880 --> 0:15:31.600 certain again, as you pointed out, like you know what 0:15:31.720 --> 0:15:37.360 the valuation is, but it's also much more confined. Um So, 0:15:37.400 --> 0:15:40.480 I guess what I'm asking is is this stack structure 0:15:40.600 --> 0:15:45.320 a way to for for companies to raise more money 0:15:45.320 --> 0:15:48.640 than they would in the I p O process. Yes, 0:15:48.760 --> 0:15:56.160 I think there's more opportunity to avoid that significant potential 0:15:56.280 --> 0:15:59.640 underpricing than a traditional I p O, where where the 0:15:59.720 --> 0:16:04.760 under writers and the larger investors are pricing in that 0:16:04.840 --> 0:16:08.480 ability to pop. I think in the average in the 0:16:08.520 --> 0:16:12.600 traditional I PO was like below market, and they are that. 0:16:12.720 --> 0:16:14.800 I mean that's the way traditional I PO is set 0:16:14.880 --> 0:16:18.360 up to see that big pop. Whereas here, I think, 0:16:18.400 --> 0:16:23.840 particularly with the significant number of SPACs in the market 0:16:23.960 --> 0:16:27.120 right now looking for targets, the targets are in a 0:16:27.160 --> 0:16:32.600 better position to negotiate favorable terms and negotiate that price 0:16:32.680 --> 0:16:37.640 so that they can maximize the amount of capital that 0:16:37.720 --> 0:16:42.160 they can raise. And that I think is what we're 0:16:42.160 --> 0:16:45.200 starting to see now in the spack market. I mean, 0:16:45.240 --> 0:16:48.560 there's still thousands of targets, so there are lots of 0:16:48.600 --> 0:16:52.000 companies out there, but they're definitely in a better position 0:16:52.160 --> 0:16:56.960 to negotiate. I record somewhere that some of them are 0:16:57.080 --> 0:17:00.880 even having these big calls back offs they bring several 0:17:00.920 --> 0:17:05.879 SPACs in and that's sort of a you know, a 0:17:05.880 --> 0:17:09.159 beauty contest if you will, Actually, can you clarify that? 0:17:09.280 --> 0:17:13.000 So the private company chooses between specs, you know what 0:17:13.040 --> 0:17:16.280 you're saying, No, I mean the SPAC goes out and 0:17:16.359 --> 0:17:20.239 looks for for for a target. You're right, But what 0:17:20.280 --> 0:17:22.800 I'm saying is what I've heard is I mean there's 0:17:22.800 --> 0:17:25.120 so when you think about it, with all of the 0:17:25.160 --> 0:17:29.720 SPACs right now looking for targets, you have to imagine 0:17:29.800 --> 0:17:32.640 some of the high tech and you know, high growth 0:17:32.680 --> 0:17:39.320 companies who might have gone through more mature financings and 0:17:39.359 --> 0:17:42.639 are just about ready to, you know, thinking about going public, 0:17:42.680 --> 0:17:46.199 and maybe you're thinking about aspact as as an alternative. 0:17:46.400 --> 0:17:50.480 If they're getting calls from several SPACs, uh, they might 0:17:50.520 --> 0:17:52.600 have the ability to say which one do they think 0:17:52.720 --> 0:17:54.440 they want to go with and which one did they 0:17:54.480 --> 0:17:56.920 think they can either get the best terms with or 0:17:56.960 --> 0:18:00.880 will be a really solid partner. So this actually leads 0:18:00.880 --> 0:18:04.000 into something I was wondering. So, you know, if a 0:18:04.000 --> 0:18:08.199 company is getting lots of different approaches from lots of 0:18:08.240 --> 0:18:14.600 different SPACs, are are all SPACs created equal? Or how 0:18:14.600 --> 0:18:18.359 would they be choosing um which SPACK to partner with? 0:18:18.480 --> 0:18:21.160 And I guess what I'm getting at. Is our SPACs 0:18:21.200 --> 0:18:25.399 a sort of neutral vehicle to take companies public or 0:18:25.680 --> 0:18:30.440 are they more about a business partnership with a sponsor? 0:18:31.320 --> 0:18:34.359 That's an excellent question. I think they really are more 0:18:34.400 --> 0:18:38.639 about a business partnership. So what does this back team 0:18:38.840 --> 0:18:42.440 bring to them? So when I look at this back 0:18:43.000 --> 0:18:47.719 huge an acquisition, our focus is predominantly the fintech and 0:18:47.880 --> 0:18:50.840 asset wealth management area, and one of the reasons is 0:18:50.960 --> 0:18:54.080 the SPAC team that we have that we put together 0:18:54.760 --> 0:19:01.919 are all from that background. So we have financial experience, 0:19:01.960 --> 0:19:06.720 we have investment experience, we have uh E, t F experience, 0:19:07.320 --> 0:19:12.600 fintech experience. So so our focus and our expertise is 0:19:12.640 --> 0:19:15.119 really in that space. And that's what we think we 0:19:15.960 --> 0:19:20.720 as a fact team effusion acquisition bring to a potential target. 0:19:21.160 --> 0:19:26.200 Is some of that uh in, some some main recognition, 0:19:26.640 --> 0:19:34.240 some significant experience, some you know, perhaps more seasoned experience 0:19:34.400 --> 0:19:39.160 in developing strategy and some new products. So that might 0:19:39.200 --> 0:19:43.360 be attractive to up target to have some of that 0:19:43.800 --> 0:19:47.679 seasoned experience come in. And and whether that's in the 0:19:47.720 --> 0:19:51.240 form of being on the board or an advisor, helping 0:19:51.240 --> 0:19:58.520 them with their strategy, really exploring their growth story, how 0:19:58.520 --> 0:20:02.679 do you get paid so ultimately UM you know in theory. 0:20:02.800 --> 0:20:06.159 You know Bill Gurley, the venture capitalist, he's been very 0:20:06.200 --> 0:20:08.960 critical of the traditional I P O process for quite 0:20:09.000 --> 0:20:11.440 some times, and he says, like SPACs are clearly better. 0:20:11.760 --> 0:20:16.120 The company doesn't give up that big pop two investors. 0:20:16.160 --> 0:20:19.240 This is like a real good avenue. And so my 0:20:19.359 --> 0:20:23.400 question is, Okay, let's say I'm buying into your um 0:20:23.560 --> 0:20:26.920 spack as an investor, and I'm trusting that you're going 0:20:27.000 --> 0:20:31.560 to make a good acquisition, a good use of my 0:20:31.600 --> 0:20:35.800 money what ultimately determines you and your other partners who 0:20:35.800 --> 0:20:38.560 are involved in this back in terms of how much 0:20:38.800 --> 0:20:43.520 UM you make. So the traditional spack when I mentioned 0:20:43.520 --> 0:20:48.480 earlier founders shares, the traditional spac basically the founder shares 0:20:48.520 --> 0:20:52.600 are purchased for a nominal amount and those founder shares 0:20:52.800 --> 0:20:56.639 usually equate to about but with warrants equate to about 0:20:58.119 --> 0:21:02.639 of the company being acquired to post the business combination. 0:21:03.240 --> 0:21:07.399 So there's significant opportunity for this fact sponsors and the 0:21:07.520 --> 0:21:12.840 directors and the management to make money of a company, 0:21:12.960 --> 0:21:17.320 especially potential growth company in in you know when I 0:21:17.359 --> 0:21:20.719 say short short term maybe you know in the sixth 0:21:21.080 --> 0:21:24.840 one year term um and in the longer term as well. 0:21:24.960 --> 0:21:28.320 So particularly with warrants, is there a minimum lock up? 0:21:28.680 --> 0:21:31.600 So like, for example, I'm looking at the chart of 0:21:31.680 --> 0:21:36.200 Nicolodge that's very sort of infamous or popular electric truck maker. 0:21:36.320 --> 0:21:39.320 They had a thirty six thousand UM dollars in total 0:21:39.359 --> 0:21:42.919 revenue last quarter market cap of about fourteen billions. So 0:21:43.520 --> 0:21:46.640 there's another debate somewhere else about that valuation. But that's 0:21:46.680 --> 0:21:50.720 not the point. My question is whoever did that spack? 0:21:50.880 --> 0:21:54.280 Whoever found that company and brought them public? Are they 0:21:54.280 --> 0:21:58.480 in a position most likely to instantly be able to 0:21:58.520 --> 0:22:00.840 cash in or do they have to? Are they locked 0:22:00.920 --> 0:22:03.480 up for a while such that ultimately, if this just 0:22:03.520 --> 0:22:05.560 turns out to be a temporary pop and the company 0:22:05.600 --> 0:22:08.640 does not turn into the next Tesla, uh, they don't 0:22:08.640 --> 0:22:13.840 get paid. Yeah, they're there, typical and it's all sort 0:22:13.840 --> 0:22:17.600 of negotiated in the structure. In in in the original structure, 0:22:17.760 --> 0:22:20.280 but there are typical lock ups, and some of the 0:22:20.440 --> 0:22:25.240 terms are changing. When I mentioned of a company, when 0:22:25.280 --> 0:22:30.080 you look at uh Akman's Pershing square Ton team, which 0:22:30.160 --> 0:22:33.480 was the biggest It's back I p O so far 0:22:34.040 --> 0:22:39.800 he raised, Um, I think I mean four billions? Did 0:22:39.800 --> 0:22:43.040 I say forty? I'm sorry, yeah, I was like, whoa, 0:22:43.119 --> 0:22:46.800 I was completely off four billion. No, No, that would 0:22:46.840 --> 0:22:49.479 be hard when only thirty billion has been raised in total. 0:22:49.520 --> 0:22:53.560 But it's four billion. Um. What's fascinating about what he 0:22:53.640 --> 0:22:58.280 did in his It's Back is he did not put 0:22:58.280 --> 0:23:01.520 in founder shares. That this is what I understand. So 0:23:01.800 --> 0:23:06.000 instead of founder shares, the sponsors and directors purchased warrants 0:23:06.040 --> 0:23:09.679 and they're exercisable. I believe it's that three years after 0:23:09.720 --> 0:23:12.520 the business combination, for about six percent of the equity 0:23:12.560 --> 0:23:15.920 of the combined business. And I think that exercise prices 0:23:15.960 --> 0:23:19.240 at about above the I p O price. So, as 0:23:19.240 --> 0:23:25.360 I mentioned, you know, the traditional structure was of equity 0:23:25.840 --> 0:23:29.280 with with the warrants, and now we're seeing, you know, 0:23:29.440 --> 0:23:34.040 changes to that structure, and I think we'll continue to 0:23:34.040 --> 0:23:39.399 see changes to the structure, particularly if the number of 0:23:39.680 --> 0:23:43.199 back I p o s continues to grow. Uh and 0:23:43.400 --> 0:23:47.359 the universe of targets, you know, was looking for a 0:23:47.440 --> 0:23:50.919 spack that maybe wants to be in you know, in 0:23:51.000 --> 0:23:54.520 it for the long run or um you know, take 0:23:54.640 --> 0:23:59.400 less less of the equity off the table. So the 0:23:59.440 --> 0:24:03.879 criticism some of the sponsor shares was that the sponsors 0:24:03.960 --> 0:24:07.400 kind of get them up front, and because they immediately 0:24:07.640 --> 0:24:12.440 get of this company, they they have a reduced incentive 0:24:12.600 --> 0:24:14.600 I guess to go out and spend a lot of 0:24:14.640 --> 0:24:18.679 time finding a quality business like they've already been paid. 0:24:18.840 --> 0:24:23.119 So Akman's innovation is that you get rid of the 0:24:23.160 --> 0:24:28.880 founder shares, you keep the incentives aligned with the investors. 0:24:29.880 --> 0:24:32.840 Is that right? I think that's right. I mean, I 0:24:33.800 --> 0:24:36.919 hear that criticism, but when I think about our spec 0:24:37.240 --> 0:24:41.000 this is we are rookies in this back market our team, 0:24:41.600 --> 0:24:46.840 and we have solid reputations. As I said, we're you know, 0:24:46.880 --> 0:24:50.880 all decent executives, and so for us, it's about our 0:24:50.880 --> 0:24:54.520 reputation as much as it is you know, to to 0:24:54.560 --> 0:24:58.240 see if we can um benefit from this in the 0:24:58.320 --> 0:25:01.359 long run financially. So we want to we want to 0:25:01.359 --> 0:25:03.960 get a really good spack deal. We want to want 0:25:03.960 --> 0:25:05.720 to do a good deal. And I don't think most 0:25:05.720 --> 0:25:09.000 SPACs are out to find, you know, sort of a 0:25:09.040 --> 0:25:11.040 paltry jill just to try and make money in the 0:25:11.640 --> 0:25:13.919 short term. I could be wrong about that. I mean, 0:25:13.920 --> 0:25:16.320 there are so many out there, but when I look 0:25:16.320 --> 0:25:18.439 at it, I think, well, it's really important for us 0:25:18.440 --> 0:25:22.480 to get a quality deal. So there's been a lot 0:25:22.480 --> 0:25:26.520 of spacts obviously. And what's interesting is that in addition 0:25:26.600 --> 0:25:29.360 to sort of season, dealmakers and financial types were also 0:25:29.359 --> 0:25:33.359 seeing the rise of sort of PLAUSI celebrity SPACs. Billy Bean, 0:25:33.560 --> 0:25:37.840 who was profiled in Moneyball, is doing a SPAC. Former 0:25:37.880 --> 0:25:42.920 Speaker of the House Paul Ryan is doing a back um. 0:25:43.040 --> 0:25:46.359 When you go out and you are trying to raise money, 0:25:46.400 --> 0:25:50.520 what's the pitch? What is the why should uh? What? 0:25:50.800 --> 0:25:52.879 You know? This sort of typical you know, if you're 0:25:52.920 --> 0:25:55.800 not acman, if you're not a household name, how do 0:25:55.880 --> 0:25:58.480 you pitch yourselves and say, you know, give your ten 0:25:58.520 --> 0:26:00.920 dollars a share to us? As opposed to the hundreds 0:26:00.920 --> 0:26:05.159 of other facts available out there for Fusion acquisition, we 0:26:05.240 --> 0:26:07.919 really look at our team. We think we have a 0:26:07.960 --> 0:26:13.359 strong team. We have experienced management. Our management board team 0:26:13.400 --> 0:26:17.320 has as they mentioned, financial services, fintech, asset management. We 0:26:17.359 --> 0:26:22.440