WEBVTT - The 2020 SPAC Attack Hits ETF Land 0:00:05.800 --> 0:00:08.280 Welcome to Trilliance. I'm Joel Webber and I'm earth All 0:00:08.320 --> 0:00:16.040 Tunist Eric. One of the themes of this year, I 0:00:16.079 --> 0:00:19.960 think has been the rise of the spack and that 0:00:20.120 --> 0:00:22.080 is a thing that, like I have to tell you, 0:00:22.120 --> 0:00:24.960 like maybe they existed before this year, but it just 0:00:25.000 --> 0:00:28.680 became this this thing that I see in headlines constantly now, 0:00:28.800 --> 0:00:32.880 spack spacks back. Where did it come from? What? What's what? Why? Why? Now? 0:00:33.080 --> 0:00:36.640 What's this all about? Well, that's definitely why we have 0:00:36.960 --> 0:00:38.920 the two guests we have on I would I would 0:00:38.960 --> 0:00:42.839 say I'm very mild in my spack knowledge. I the 0:00:42.880 --> 0:00:45.240 phrase I keep here thinking of my head is spack attack. 0:00:45.400 --> 0:00:48.400 I feel like I'm being attacked by spacks and spack 0:00:48.520 --> 0:00:52.440 news um Our associate Morgan Barna did did a little 0:00:52.440 --> 0:00:54.840 research into the underlying market. It looks like there's over 0:00:54.880 --> 0:00:58.440 a hundred of them, double from last year, and the 0:00:58.480 --> 0:01:01.480 market cap or the value is also double, so it's 0:01:01.480 --> 0:01:04.440 almost like they were in existence before, but they've really 0:01:04.440 --> 0:01:06.479 blown up this year. And so if it seems like 0:01:07.000 --> 0:01:10.240 you're being attacked by SPACs, it's because you are. And 0:01:10.560 --> 0:01:13.120 of course if there's a new area, you know there's 0:01:13.160 --> 0:01:14.680 going to be an e t F tracking it. So 0:01:14.840 --> 0:01:16.720 that's also part of the reason we're covering it, because 0:01:16.720 --> 0:01:18.640 now there's an e t F that tracks backs in 0:01:18.640 --> 0:01:21.520 the US and and it's back if you're if you're 0:01:21.560 --> 0:01:24.800 new to that term, there's a blink check company sort 0:01:24.800 --> 0:01:28.240 of a thing with that. What what's that about? Eric, Yeah, 0:01:28.280 --> 0:01:30.080 So for best my knowledge, we'll get our guests to 0:01:30.640 --> 0:01:34.000 see correct me if I'm wrong. But it's special purpose 0:01:34.040 --> 0:01:37.679 acquisition company. And to me, it seems like just a 0:01:37.680 --> 0:01:39.720 another way to bring a company public that could be 0:01:39.760 --> 0:01:43.440 easier cheaper than the traditional I p O path. And 0:01:44.440 --> 0:01:47.720 as somebody who's seen necessity being the mother of invention, 0:01:48.400 --> 0:01:50.200 this happens a lot. You know, this is just the 0:01:50.240 --> 0:01:53.520 way capitalism works. So I think SPACs are just a 0:01:53.560 --> 0:01:55.760 way for for people to bring companies public in a 0:01:55.760 --> 0:01:58.880 new way. Um. And that's really it, and you know, 0:01:59.000 --> 0:02:00.800 and that's why our guess are here to help us 0:02:00.880 --> 0:02:04.800 navigate these waters. We've got Julian Clamatico, who's the CEO 0:02:05.000 --> 0:02:09.520 of Accelerate Financial Technologies, and then Joseph Schuster, who's the 0:02:09.520 --> 0:02:13.400 founder of I p O X Schuster, Eric White. These 0:02:13.400 --> 0:02:17.680 two guys right, well, Julian to me has been really 0:02:17.680 --> 0:02:19.519 on this back thing early. I mean, he has a 0:02:19.639 --> 0:02:22.320 a t F in Canada called the Arbitrage E t 0:02:22.480 --> 0:02:24.400 F and he has a ton of SPACs in there. 0:02:24.440 --> 0:02:27.799 So we wrote a note about two months ago basically 0:02:27.840 --> 0:02:30.040 saying that you probably can't do an e t F 0:02:30.120 --> 0:02:32.720 for SPACs. The closest you can get as Julians, which 0:02:32.760 --> 0:02:35.919 includes some SPACs, because these are very small companies. Their 0:02:36.400 --> 0:02:39.200 market cap is like two fifty millions to five dred million. 0:02:39.440 --> 0:02:41.040 There's a couple of big ones, but that's like right 0:02:41.080 --> 0:02:43.760 on the borderline of microcap. So we E t F 0:02:43.840 --> 0:02:46.520 needs more liquidity. So I was talking to him when 0:02:46.520 --> 0:02:48.919 I was doing some research on this, and he's very 0:02:48.960 --> 0:02:53.040 knowledgeably as a SPAC monitor. But our call for how 0:02:53.120 --> 0:02:55.639 you couldn't have a spack ETF was obviously over overwhelmed 0:02:55.639 --> 0:02:58.320 because like two weeks later they filed for one. I think, 0:02:58.360 --> 0:02:59.800 you know, being first to market an e t F 0:02:59.800 --> 0:03:02.840 for a is very important. That issued Defiance, which has 0:03:02.880 --> 0:03:04.200 the E t F here in the US, which the 0:03:04.240 --> 0:03:06.880 ticker s p a K is not on today, but 0:03:07.320 --> 0:03:09.560 will you know go over the E t F now 0:03:09.560 --> 0:03:12.200 and then in this But the big thing to know 0:03:12.240 --> 0:03:15.600 about that E t F of the holdings are pre 0:03:15.680 --> 0:03:20.320 acquisition SPACs, and are SPACs the companies that SPACs brought public. 0:03:20.360 --> 0:03:24.639 Will dive into that a little bit later, moving to Joseph. Now, 0:03:24.639 --> 0:03:26.120 when you think of SPACs, you think I p O 0:03:26.320 --> 0:03:28.920 So in our research, we've also covered I p O 0:03:29.080 --> 0:03:31.359 E t f s and I'm a big fan of these. Uh. 0:03:31.400 --> 0:03:35.080 The E t F that his index tracks, or the 0:03:35.160 --> 0:03:37.320 E t F tracks his index is fp X from 0:03:37.360 --> 0:03:40.320 First Trust and it's been around, I don't know, fifteen 0:03:40.560 --> 0:03:44.560 years ish and it is blowing away the SMP. It's 0:03:44.600 --> 0:03:48.320 almost doubling it because they've a couple huge winners and 0:03:49.000 --> 0:03:50.920 SPACK and I p O E t s to me, 0:03:51.120 --> 0:03:54.640 do serve a purpose potentially the viewer, the listener can 0:03:54.680 --> 0:03:57.520 decide because a lot of the times they track companies 0:03:57.520 --> 0:03:59.440 that just aren't in the big index as yet. Big 0:03:59.480 --> 0:04:03.680 index is can be a little uh conservative, and you 0:04:03.720 --> 0:04:05.360 could take a couple of years for one of these 0:04:05.360 --> 0:04:07.680 companies to get in there. So to me, they're tracking 0:04:07.680 --> 0:04:10.480 an area that hardly anybody has any exposure to. Um 0:04:10.520 --> 0:04:12.800 So we've always thought there was kind of value add 0:04:12.800 --> 0:04:14.720 but there's not a ton of assets in the space 0:04:14.880 --> 0:04:19.920 yet this time on Brilliance, I p oing too hard 0:04:20.040 --> 0:04:27.440 can give you us back at you out of Noba now, Julian, 0:04:27.480 --> 0:04:30.640 welcome to Brilliance. Thank you guys, thanks for having me. 0:04:31.080 --> 0:04:33.159 Glad to be here. Why does the world needs backs, 0:04:34.400 --> 0:04:37.719 you know all, that's an interesting question and they've really 0:04:37.800 --> 0:04:41.719 emerged this year as a popular new asset class. And 0:04:42.360 --> 0:04:45.039 the point of a SPACK and the reason why it 0:04:45.160 --> 0:04:50.840 exists is basically twofold number one. It acts as uh 0:04:51.480 --> 0:04:56.000 structure in order to take a private company public versus 0:04:56.440 --> 0:05:00.400 say a direct listing or a traditional I p O. Now, 0:05:00.440 --> 0:05:04.120 SPACs are unique in that the type of companies that 0:05:04.200 --> 0:05:07.440 they're bringing public are different than what would be used 0:05:07.440 --> 0:05:10.440 for direct listing or traditional IPO. For example, on a 0:05:10.480 --> 0:05:14.360 direct listing, these are typically very large private companies that 0:05:14.480 --> 0:05:17.920 don't need to raise capital on their growing public transaction 0:05:18.279 --> 0:05:21.359 than traditional I p O. S have really become exit 0:05:21.360 --> 0:05:25.280 opportunities for venture capital and private equity firms where they're 0:05:25.279 --> 0:05:28.479 looking to offload their steak onto the public markets. We 0:05:28.480 --> 0:05:32.040 haven't seen the traditional I p O process being used 0:05:32.440 --> 0:05:37.200 for actually raising growth capital to fund growth businesses, so 0:05:37.240 --> 0:05:40.880 we've seen the SPACK emerge where you have more earlier 0:05:41.040 --> 0:05:45.159 stage entities. Many of them are pre profit or even 0:05:45.160 --> 0:05:48.919 pre revenue, where they're actually coming public and raising a 0:05:49.040 --> 0:05:53.960 significant amount of capital, which includes cash in the blank 0:05:54.040 --> 0:05:57.520 check company. As you guys indicated, they generally raised between 0:05:57.720 --> 0:06:01.080 two to three million dollars on the spack PO and 0:06:01.120 --> 0:06:04.640 then with their business combination as a spack combines with 0:06:04.680 --> 0:06:08.240 the private company to bring them public, they generally include 0:06:08.279 --> 0:06:11.960 what's known as a pipe financing, private investment in public 0:06:12.000 --> 0:06:16.480 equity that can add hundreds of millions of dollars. More So, 0:06:16.560 --> 0:06:20.240 you can have these early stage companies growing public at 0:06:20.240 --> 0:06:23.479 say a billion dollar valuation, and raising five hundred million 0:06:23.520 --> 0:06:28.160 dollars in growth capital to invest in growing that business. 0:06:28.480 --> 0:06:32.640 So you really haven't seen that opportunity for public market 0:06:32.680 --> 0:06:37.640 investors to get access to those earlier stage growth entities 0:06:37.880 --> 0:06:42.919 that are perhaps late stage venture capital type financing rounds, 0:06:43.160 --> 0:06:47.320 say Series D, Series E, which were usually kept to 0:06:47.360 --> 0:06:49.440 the private markets. They are now coming to the public 0:06:49.480 --> 0:06:52.880 markets through SPACs now on the other side of the coin. 0:06:53.560 --> 0:06:57.800 One main driver that has led to a massive increase 0:06:57.839 --> 0:07:01.200 in popularity and number of acts. They're now north of 0:07:01.279 --> 0:07:04.120 an eighty billion dollar asset class, which is more than 0:07:04.920 --> 0:07:10.320 tripled since April is the sponsor promote, and by sponsor promote, 0:07:10.880 --> 0:07:16.360 I'm talking about the equity compensation given to the founder 0:07:16.480 --> 0:07:19.840 of the spack, which is as high as twenty of 0:07:19.920 --> 0:07:23.520 the spack. So say it's bacco is public raising dollars 0:07:23.560 --> 0:07:27.760 in cash to do a deal. The sponsor or founder 0:07:27.800 --> 0:07:30.360 of that SPAC could be awarded a forty million dollar 0:07:30.440 --> 0:07:36.120 stake in the ProForma entity once the business combination closes. So, um, 0:07:36.360 --> 0:07:38.800 let's go through a real life example, and I the 0:07:38.880 --> 0:07:41.720 two that I think most people may have heard of 0:07:41.760 --> 0:07:43.840 if they've been following this at all, or Virgin Galactic 0:07:44.520 --> 0:07:47.360 and Draft Kings. Those are actually two of the biggest 0:07:47.360 --> 0:07:49.520 waitings in the spack etf because again at whole, some 0:07:49.520 --> 0:07:52.280 of the companies after they've been brought public. Walk us 0:07:52.320 --> 0:07:54.640 through you can pick either example, but just walk us 0:07:54.640 --> 0:07:58.520 through there was a SPAC that existed before they actually 0:07:58.520 --> 0:08:01.240 announced that. How long did and how did they get 0:08:01.280 --> 0:08:03.640 that company? How do they pick the company, and why 0:08:03.680 --> 0:08:06.160 does that company go into this back instead of doing 0:08:06.200 --> 0:08:09.600 attritional IPO. Maybe I guess, you know, walk us through 0:08:09.640 --> 0:08:13.240 the timeline of of one of those. That's a really 0:08:13.280 --> 0:08:16.640 good question, and we can start off just by explaining 0:08:16.760 --> 0:08:21.040 how the special purpose acquisition company structure works. Typically, they 0:08:21.080 --> 0:08:25.000 go public and an initial public offering at ten dollars 0:08:25.040 --> 0:08:28.880 per unit. So SPACK initially consists of units, and after 0:08:28.960 --> 0:08:33.120 fifty two days they split into common shares plus warrants, 0:08:33.160 --> 0:08:36.480 so the average unit comes with it could be as 0:08:36.520 --> 0:08:39.800 low as point to five warrants per unit. It could 0:08:39.800 --> 0:08:43.400 be as high as one warrant per unit, so that 0:08:43.520 --> 0:08:47.680 represents additional equity upside for people investors like myself to 0:08:47.800 --> 0:08:50.959 subscribe to the initial public offering. So once it's public, 0:08:52.040 --> 0:08:56.040 they generally have twenty four months to complete a business combination, 0:08:56.480 --> 0:08:59.400 and if they don't, then they liquidate and they pay 0:08:59.440 --> 0:09:02.440 investors back their money plus acrude interest. They're not allowed 0:09:02.480 --> 0:09:04.960 to spend the money on anything. They keep it in 0:09:05.000 --> 0:09:09.080 trust and they invest that in short term treasury bents. 0:09:09.120 --> 0:09:11.840 And once you go public, then the quest to find 0:09:12.000 --> 0:09:16.240 an attractive private company begins. So specifically, we can talk 0:09:16.320 --> 0:09:19.840 about one of those, Virgin Galactic, how that process went, 0:09:20.600 --> 0:09:23.760 and the way that I understand it is Virgin Galactic 0:09:23.840 --> 0:09:27.440 was pursuing some sort of strategic alternatives process. I'm not 0:09:27.480 --> 0:09:29.559 sure if they tried to go the traditional I p 0:09:29.720 --> 0:09:31.599 O route or tried to sell themselves or what. But 0:09:31.640 --> 0:09:34.680 they're looking to do something. And Virgin Galactic was a 0:09:34.800 --> 0:09:39.320 very early stage company revenues many many years away, and 0:09:39.360 --> 0:09:41.840 so they didn't really fit the mold for a traditional 0:09:41.920 --> 0:09:45.320 initial public offering as we see them these days. Typically, 0:09:46.080 --> 0:09:50.480 UH companies growing the traditional route are much much more mature. 0:09:50.920 --> 0:09:54.320 If you take Uber for example, really at the tail 0:09:54.520 --> 0:09:57.600 end of their growth stage. And so this back in 0:09:57.679 --> 0:10:01.600 Virgin Galactics case was Social Capital Head of Sophia one. 0:10:01.720 --> 0:10:04.600 There's not actually six of them, and three of them, 0:10:04.760 --> 0:10:07.560 three new ones, went public last week, raising a stunning 0:10:07.600 --> 0:10:11.320 two point one billion dollars in capital. But Social Capital 0:10:11.360 --> 0:10:15.400 Head of Sophia is run by Chamath Pala Hepatia, which 0:10:15.480 --> 0:10:18.640 is you know, well known VC out in Silicon Valley. 0:10:18.840 --> 0:10:22.440 So it's first back. Social Capital Head of Sophia one 0:10:22.920 --> 0:10:25.439 went public in an I p O, raised a few 0:10:25.480 --> 0:10:28.000 hundred million dollars and went on a quest to do 0:10:28.040 --> 0:10:30.680 a business combination. And they're actually getting very close to 0:10:30.720 --> 0:10:33.360 the tail end of their two years in which they 0:10:33.360 --> 0:10:36.559 would have had to give money back and lose all 0:10:36.600 --> 0:10:39.640 the money they invested into it. But you know, luckily 0:10:39.800 --> 0:10:43.280 this Virgin Galactic deal came along, and that one was 0:10:43.400 --> 0:10:46.560 really a turning point because prior to that, the spact 0:10:47.040 --> 0:10:51.800 market was small, didn't get a lot of attention, and 0:10:52.840 --> 0:10:55.600 the deals were kind of home hump. When Virgin Galactic 0:10:55.679 --> 0:10:57.959 came out, it was the first one that was this 0:10:58.240 --> 0:11:01.800 VC type investment opportunity any where. It was still very 0:11:01.840 --> 0:11:04.880 early stage. You have revenue way way out there, and 0:11:04.920 --> 0:11:08.200 I mean the business model is space flight, which is 0:11:08.240 --> 0:11:13.080 super futuristic, right, So it had this story to it was, 0:11:13.400 --> 0:11:15.800 you know, Virgin Galactic. It is a story stock because 0:11:15.840 --> 0:11:17.840 you really need to believe that you can't be looking 0:11:17.880 --> 0:11:20.960 at the financial statements any sort of fundamentals to be 0:11:21.040 --> 0:11:23.440 an investor in that story. So when it came out 0:11:24.520 --> 0:11:27.600 and the stock just went crazy, I think that was 0:11:27.679 --> 0:11:32.280 one of the key main drivers in spurring this kind 0:11:32.320 --> 0:11:34.720 of growth of this new asset class number one and 0:11:34.760 --> 0:11:37.520 then you know number two. It just shows that if 0:11:37.520 --> 0:11:41.440 you're successful in one speck, then you just keep bringing 0:11:41.440 --> 0:11:44.320 these out. And now Social Capital and SMATH is up 0:11:44.360 --> 0:11:48.640 to six raising well above three three billion dollars. So 0:11:48.920 --> 0:11:52.320 that was certainly a really interesting deal. It's still trading 0:11:52.400 --> 0:11:56.079 very well well above the ten dollar price of its 0:11:56.120 --> 0:11:58.079 I p O. And that's really how you judge a 0:11:58.200 --> 0:12:01.720 spack success at least in the short term, is how 0:12:01.800 --> 0:12:06.160 high above ten dollars is it trading? So Julian, what 0:12:06.320 --> 0:12:09.400 kind of UM exposure have you had two spacts and 0:12:09.440 --> 0:12:13.400 how does your et F come into play there? We 0:12:13.600 --> 0:12:18.240 approach it on a different investment strategy than others. We 0:12:18.280 --> 0:12:22.360 look at what we call spack arbitrage. So the way 0:12:22.360 --> 0:12:28.560 that we approach SPACs is invest before they announce a deal, 0:12:28.840 --> 0:12:31.120 and we're looking to buy at or below their net 0:12:31.160 --> 0:12:34.560 asset value, meaning the cash that they have in the 0:12:34.559 --> 0:12:38.200 bad because the key aspect to a spack arbitrage strategy 0:12:38.679 --> 0:12:42.360 is you're looking for a guaranteed return, and the way 0:12:42.360 --> 0:12:46.480 that you get that is that pre deal spacks offer 0:12:46.600 --> 0:12:50.520 a unique exposure for one main reason, and that is 0:12:50.600 --> 0:12:52.880 they keep cash on hand so you know it's not 0:12:52.960 --> 0:12:55.080 going anywhere and they can't spend it. So you have 0:12:55.120 --> 0:12:58.679 this guaranteed return of basically treasury bills because they invested 0:12:58.720 --> 0:13:01.640 in short term treasuries not earning a lot these days, 0:13:01.720 --> 0:13:05.760 maybe ten fifteen basis points. However, either they don't find 0:13:05.760 --> 0:13:09.200 a deal in liquidate and you get the yield of 0:13:09.240 --> 0:13:12.360 T bills, or they do announce a deal, and there's 0:13:12.400 --> 0:13:15.360 this one key aspect, which is they allow you to 0:13:15.480 --> 0:13:19.400 redeem your shares for cash plus acrude interest, getting that 0:13:19.480 --> 0:13:22.360 T bill like payoff. So that's sort of the worst 0:13:22.360 --> 0:13:25.600 case scenario. We're looking to bias back at or below 0:13:25.640 --> 0:13:30.000 its net asset value. And here's where um the upside 0:13:30.080 --> 0:13:34.640 comes in. We previously discussed the sort of downside scenario 0:13:34.679 --> 0:13:38.280 where you just earn basically T buills and that discount 0:13:38.320 --> 0:13:40.840 if you buy it at a discount to net asset value. However, 0:13:40.880 --> 0:13:44.280 in the upside scenario, if they announce a great deal 0:13:44.360 --> 0:13:47.200 that the market really likes, say such as a virgin 0:13:47.240 --> 0:13:52.080 galactic UH such as a Nicola highly on Lordstown, things 0:13:52.080 --> 0:13:57.079 of that nature, where the spack just kind of surges 0:13:57.120 --> 0:14:00.559 and price can go double or triple above the ten 0:14:00.600 --> 0:14:04.800 dollar range. That's where an arbitrager really can make significant 0:14:04.800 --> 0:14:08.280 returns at a very little downside risk. So we're looking 0:14:08.320 --> 0:14:11.360 to invest in pre deal SPACs at or below their 0:14:11.559 --> 0:14:14.920 ten dollar plus recruit interest, net asset value, and exit 0:14:15.040 --> 0:14:19.200 prior to the deal closing. Either we earn a T 0:14:19.360 --> 0:14:23.000 bill return and sort of exit either through redemption or liquidation. 0:14:23.600 --> 0:14:25.680 But in the upside scenario, what we're really in it 0:14:25.760 --> 0:14:29.400 for is this surge and the share price in what 0:14:29.600 --> 0:14:33.280 I termed the spack pop. If you look at any 0:14:33.320 --> 0:14:37.120 of them announcing a deal, especially in these hot spaces 0:14:37.160 --> 0:14:41.640 such as electric vehicles, biotechnology, things of that nature, if 0:14:41.640 --> 0:14:44.480 they can do that, then we seek to exit prior 0:14:44.600 --> 0:14:48.160 to the deal completing and us passing that redemption date. 0:14:48.280 --> 0:14:53.120 So you're you've effectively found the rare wind win in 0:14:53.200 --> 0:14:57.200 finance exactly. Yeah, I call it heads. We win tails, 0:14:57.280 --> 0:15:00.280 we win big and and you've mentioned the pop there. 0:15:00.320 --> 0:15:02.840 Can you give us a sense of like, what you know, 0:15:02.880 --> 0:15:05.880 what kind of range of a pop are are you 0:15:05.920 --> 0:15:09.680 able to lock in here? And what percentage of them pop? 0:15:09.720 --> 0:15:12.760 If there's a hundred right now, how many will pop? 0:15:13.800 --> 0:15:16.480 That's really good question, and that is moving all the 0:15:16.520 --> 0:15:21.280 time with all the attention coming to the space. It 0:15:21.320 --> 0:15:24.920 didn't used to be as attractive as it is right now. 0:15:24.960 --> 0:15:27.640 So I'm not sure how long this opportunity will last. 0:15:27.720 --> 0:15:31.720 But if we look at stocks like Nicola, which went 0:15:31.880 --> 0:15:35.280 north of fifty dollars per share, there's another one called 0:15:35.360 --> 0:15:39.840 highly on that one was incredibly lucrative. So I think 0:15:39.840 --> 0:15:42.600 the ones where you're getting triple digit returns in a 0:15:42.640 --> 0:15:45.600 short period of time, I know, with a percent or 0:15:45.600 --> 0:15:51.080 above twenty dollars per share, those are say one in 0:15:52.160 --> 0:15:56.360 twenty one and thirty. However, the ones where we see 0:15:56.400 --> 0:16:00.080 a pop in the range, those are quite calm. It 0:16:00.800 --> 0:16:04.080 we probably see those at least of the time, at 0:16:04.160 --> 0:16:08.400 least in the current environment. The way you are talking 0:16:08.480 --> 0:16:10.520 kind of does remind me of the I p o 0:16:10.560 --> 0:16:12.240 E t F. So I want to bring Joseph in here. 0:16:13.000 --> 0:16:15.080 We when we study the I p o E t F, 0:16:15.120 --> 0:16:17.320 which let me go over the tickers real quick, Julian's 0:16:17.360 --> 0:16:20.880 tickers A, R, B, C N. He's up in Canada. 0:16:21.200 --> 0:16:23.320 The spack ETF here in the U S is s 0:16:23.360 --> 0:16:28.520 p a K which holds of these pre acquisition SPACs 0:16:28.520 --> 0:16:32.040 that you hope pop, and of companies already in the market, 0:16:32.160 --> 0:16:36.040 such as Draft Kings. And when we look at the 0:16:36.040 --> 0:16:38.040 I p o E t F, and we look at 0:16:38.080 --> 0:16:41.240 these companies that do the traditional route, all you need 0:16:41.360 --> 0:16:45.160 is like a couple superstars from like to just rocket 0:16:45.200 --> 0:16:48.320 ship stocks to make up for plenty of dogs. And 0:16:48.360 --> 0:16:50.680 we found that fp X was really the performance was 0:16:50.720 --> 0:16:53.400 powered off of a couple of Facebook type companies, but 0:16:53.440 --> 0:16:55.280 there were a bunch of duds, But you don't it 0:16:55.640 --> 0:16:59.080 gets offset. So Joseph, I guess I want to talk 0:16:59.120 --> 0:17:04.159 about the after they come out, which spack owns and 0:17:04.200 --> 0:17:07.480 then you own DraftKings, you own once I guess of 0:17:07.560 --> 0:17:12.400 these talk about these companies after they're out and how 0:17:12.480 --> 0:17:17.399 they work into the traditional I p O index. So, um, 0:17:17.520 --> 0:17:20.520 what we are basically doing we start once the I 0:17:20.640 --> 0:17:22.280 p O is done, so we don't buy it the 0:17:22.520 --> 0:17:25.000 I p O prisents and get the pop because that's 0:17:25.040 --> 0:17:27.920 really not accessible. So what we do is we start 0:17:27.960 --> 0:17:32.600 with one large underlying universe, which we call the ipoxes composite, 0:17:32.920 --> 0:17:36.240 and it sees underlying universe. We buy companies on day 0:17:36.280 --> 0:17:40.720 six and they exit automatically four years. So after four years, 0:17:40.760 --> 0:17:44.040 it's because we believe that's the kind of maximum of 0:17:44.119 --> 0:17:46.800 the going public effect, and that's when really the risk 0:17:46.880 --> 0:17:51.280 and the beta uncertainty about set new listing really gets resolved. 0:17:51.320 --> 0:17:53.879 So we have an underlying university in the US of 0:17:54.520 --> 0:17:58.760 nine plus companies right now reflecting pretty much all the 0:17:58.840 --> 0:18:02.600 deal flow over the last four years from I p 0:18:02.760 --> 0:18:05.640 O spinoffs as well and then and specs as well. 0:18:06.160 --> 0:18:08.440 And then what we do was the uh we see 0:18:08.520 --> 0:18:12.440 fp X and the underlying index is the IPOX one 0:18:13.280 --> 0:18:15.960 is basically on a quarterly basis, we take the top 0:18:16.040 --> 0:18:19.960 hundred names on the market cap weighted basis in this 0:18:20.160 --> 0:18:24.960 underlying composite index, and that kind of gives us exposure 0:18:25.480 --> 0:18:29.040 to the momentum i PO like the soon videos, you know, 0:18:29.200 --> 0:18:32.640 the facebooks in the past, Svisa, the master cards while 0:18:32.800 --> 0:18:35.639 through a quarterly rebalance and we're able to kind of 0:18:35.880 --> 0:18:37.840 get rid of the losers as well, and we hold 0:18:37.880 --> 0:18:41.240 them typically as an asset for the first four years 0:18:41.240 --> 0:18:45.600 of trading. Um. Really originally we developed the index really 0:18:45.640 --> 0:18:50.280 from a performance perspective. We news as performance aertain the 0:18:50.280 --> 0:18:53.720 I p O market, but only a certain segment like 0:18:53.840 --> 0:18:56.639 let's say twenty thirty percent, and many companies will be 0:18:56.720 --> 0:19:00.560 the crispy crime Donuts of the world. And so that's 0:19:00.560 --> 0:19:03.320 where we start. Like we we started with, hey, we 0:19:03.359 --> 0:19:05.879 want to capture the alpha in the I p O market, 0:19:05.960 --> 0:19:09.640 not really provide access to the whole kind of spaces 0:19:09.760 --> 0:19:13.120 as as an equity class um as we're pretty well 0:19:13.480 --> 0:19:15.919 formed pips up performance and or it was a c 0:19:16.080 --> 0:19:19.199 SMP Obviously the question is what is what is the 0:19:19.320 --> 0:19:24.280 correct benchmark? Obviously, how respects fall in here is if 0:19:24.320 --> 0:19:27.240 a certain company is large enough, let's say one and 0:19:27.240 --> 0:19:29.840 a half two billion, it gets an our radar and 0:19:29.920 --> 0:19:33.240 the IPOX hundred, then it becomes large enough, and then 0:19:33.280 --> 0:19:36.840 we basically by default have to buy it because we 0:19:36.960 --> 0:19:40.280 know the good performance is driven by the larger I 0:19:40.440 --> 0:19:43.760 p O s which can get large by which are 0:19:43.840 --> 0:19:48.080 large by default or by momentum like teslas or and 0:19:48.080 --> 0:19:52.240 and really the underperformance story of the IPO market is 0:19:52.320 --> 0:19:57.200 driven by small microcap small it pos at least historically. Yeah, 0:19:57.359 --> 0:19:59.960 I think the I p O fp X in particular, 0:20:00.000 --> 0:20:01.520 and there's another one called I p O they're both 0:20:01.560 --> 0:20:05.000 having good years and fp X it's really interesting to 0:20:05.040 --> 0:20:07.439 me that this thing doesn't have has a billion, so 0:20:07.520 --> 0:20:11.919 that's not chump change. But you know, given the performance 0:20:12.040 --> 0:20:14.760 and the fact that you have only four percent of 0:20:14.800 --> 0:20:17.840 the portfolio of fp X is overlapped with the S 0:20:17.880 --> 0:20:21.879 and P five hundreds, so it's very unique exposure. It's 0:20:21.920 --> 0:20:25.720 almost like you're capturing the toddlers before they get to 0:20:25.800 --> 0:20:29.239 be teenagers and enter the big benchmarks. Why do you 0:20:29.280 --> 0:20:33.200 think more people don't Um, is it the PR? Because 0:20:33.240 --> 0:20:35.959 when I PR doesn't go well gets really dragged through 0:20:35.960 --> 0:20:38.600 the press. Do you think the PR is a problem 0:20:38.720 --> 0:20:43.560 here too, that people have bad feelings or that oh 0:20:43.720 --> 0:20:45.479 all these Wall Street banks are going to make all 0:20:45.520 --> 0:20:48.480 this money and screw me over? Is that really the 0:20:48.640 --> 0:20:50.800 big challenge here? Because the performance, you'd think there'd be 0:20:50.800 --> 0:20:53.840 more assets. Yeah. I think the assets are now like 0:20:53.920 --> 0:20:56.479 one point six billion and total around more than two 0:20:56.560 --> 0:21:00.679 billion in iOS as well as a last fry. I 0:21:00.680 --> 0:21:03.880 think initially took a long time to get it off 0:21:03.920 --> 0:21:09.800 the ground. Obviously, I think one drawback is for for 0:21:09.800 --> 0:21:12.640 for us as we're starting the aftermarket, right, we don't 0:21:12.640 --> 0:21:14.920 really care as we buy Google that's the I p 0:21:15.080 --> 0:21:18.360 O price and flip it like you know sixty flip 0:21:18.480 --> 0:21:21.000 it at ninety. We care of buying it at hundred 0:21:21.000 --> 0:21:24.480 twentys and keep it for a long period of time 0:21:24.520 --> 0:21:27.720 and said it maybe at four dollars, which initially really 0:21:27.760 --> 0:21:30.640 took a lot of markets in appeal away. Um kind 0:21:30.640 --> 0:21:36.119 of from from the concept. Um the other opposite challenges, Um, 0:21:36.200 --> 0:21:38.840 you know what is our benchmark? Were does Morning Stop 0:21:38.880 --> 0:21:41.720 put it? There's a lot of because obviously we have 0:21:41.720 --> 0:21:45.159 a rotational kind of cycle where but we don't know 0:21:45.240 --> 0:21:48.000 how the kind of portfolio looks like in four to 0:21:48.119 --> 0:21:52.200 five years. So you know, like I think financial advisor 0:21:52.359 --> 0:21:55.120 at least historically have had a kind of tough time 0:21:55.200 --> 0:21:58.600 to know where as they put it right, recently, it 0:21:58.640 --> 0:22:02.879 really becomes part of kind of event driven strategies. You know, 0:22:02.960 --> 0:22:05.959 it has kind of started to replace private equity as 0:22:06.000 --> 0:22:08.960 well because we hold some of those names. And then 0:22:09.000 --> 0:22:11.080 another reason is we are just you know, a small 0:22:11.119 --> 0:22:14.960 innovative firm which you know tries to you know, kind 0:22:14.960 --> 0:22:18.320 of pioneer the concept of you buy I P s 0:22:18.359 --> 0:22:21.240 in the aftermarket, you just index and rather than buying 0:22:21.280 --> 0:22:25.480 it through you know, dealer connections in the immediate you know, 0:22:25.560 --> 0:22:27.600 bp FO the I P and and flip it make 0:22:27.680 --> 0:22:32.560 quick box and that's another challenge. However, obviously we don't 0:22:32.560 --> 0:22:37.160 speak for themselves, and you know, at fifty eight basis points, 0:22:36.880 --> 0:22:39.639 there's been a you know, a very attractive product for 0:22:39.720 --> 0:22:43.520 many financial advisors. So so Joseph, one of the things 0:22:43.520 --> 0:22:46.240 that Julian said that really struck me was the way 0:22:46.280 --> 0:22:49.720 he was describing SPACs is sort of like it allows 0:22:50.000 --> 0:22:53.080 investors to have access to a type of company and 0:22:53.119 --> 0:22:56.800 those types of companies to have access to public markets. 0:22:56.840 --> 0:22:58.800 It sort of seems like the original I p O 0:22:59.320 --> 0:23:03.159 right with being able to fund companies with public public markets. 0:23:03.880 --> 0:23:06.280 How permanent of a shift do you feel like this 0:23:06.359 --> 0:23:10.760