WEBVTT - Cowen's Co-President on Why SPACs Are Having Such a Moment 0:00:10.760 --> 0:00:14.920 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:15.000 --> 0:00:21.919 I'm Joe Wisenthal and I'm Tracy Halliway, Tracy. Uh will 0:00:21.920 --> 0:00:26.440 obviously be remembered for a lot of things, no doubt, 0:00:27.240 --> 0:00:33.080 you know, after the pandemic, the all of the political 0:00:33.120 --> 0:00:36.400 stuff that we saw, the extraordinary sort of year in 0:00:37.120 --> 0:00:40.640 economics and the stock market and everything Somewhere down the 0:00:40.680 --> 0:00:43.600 list maybe like down like fifty or seventy or ninety 0:00:43.840 --> 0:00:47.440 in terms of like the things that people look back on, 0:00:47.920 --> 0:00:49.680 I would say it's kind of a the Year of 0:00:49.680 --> 0:00:56.440 the Spack. Yeah, certainly, definitely if you're in capital markets, 0:00:56.640 --> 0:00:59.760 it's the year of the Spack. And I think I'm 0:00:59.760 --> 0:01:02.040 trying to remember the latest numbers, but I think it 0:01:02.120 --> 0:01:07.039 was something like sixty billion dollars raised in which was 0:01:07.120 --> 0:01:12.759 more than the previous ten years combined, something like that. Right, 0:01:12.760 --> 0:01:15.640 So we've just seen this extraordinary surge for people who 0:01:15.680 --> 0:01:20.319 don't know, it's like, uh, these vehicles where people buy 0:01:20.360 --> 0:01:23.520 into an I p O and then the company has 0:01:23.600 --> 0:01:26.520 some certain amount of time to then go out and 0:01:26.880 --> 0:01:30.280 actually acquire a company bring it public, subject to the 0:01:30.280 --> 0:01:32.880 approval of the people who bought into the I p O. 0:01:33.319 --> 0:01:36.360 We've seen a lot in the electric vehicle space, We've 0:01:36.400 --> 0:01:40.000 seen a lot of other technology other areas, but just 0:01:40.120 --> 0:01:44.280 generally a it exploded and be you know once, like 0:01:44.400 --> 0:01:48.440 many things, not the type of thing we expected to 0:01:48.480 --> 0:01:50.720 see in the first half of the year. I think, 0:01:50.760 --> 0:01:53.360 like thinking back to March April May, we would not 0:01:53.480 --> 0:01:57.880 expect it to be such an extraordinary year in capital markets, right. 0:01:58.040 --> 0:02:00.640 And I think one of the reasons that facts tend 0:02:00.680 --> 0:02:04.240 to draw a lot of attention is that most people 0:02:04.320 --> 0:02:07.680 are a lot of people associate them with these sort 0:02:07.680 --> 0:02:13.280 of like pre two financial crisis excesses. So there's this 0:02:13.320 --> 0:02:16.440 idea that there's so much money slashing around in the system, 0:02:16.480 --> 0:02:19.000 people are sort of desperate to put it to work, 0:02:19.080 --> 0:02:21.880 so they'll just stick it into a blank check company, 0:02:22.360 --> 0:02:25.920 not knowing what that company is eventually going to be, 0:02:26.000 --> 0:02:28.520 and just sort of hoping um that their money will 0:02:28.560 --> 0:02:31.320 get deployed in one way or another. So I think 0:02:31.360 --> 0:02:33.920 a lot of people look at it as another example 0:02:34.320 --> 0:02:37.399 a froth in the market. But again, as we discussed 0:02:37.440 --> 0:02:40.680 on a previous episode with someone who is actually running 0:02:41.280 --> 0:02:44.840 us back, there's also an argument that this makes sense. 0:02:45.000 --> 0:02:48.280 The structure makes sense for a lot of companies in 0:02:48.320 --> 0:02:51.079 the market. Yes, I think that's right for a lot 0:02:51.080 --> 0:02:53.320 of companies that make sense. And I think that's also 0:02:53.760 --> 0:02:56.360 UM a part of the change, which is that not 0:02:56.480 --> 0:02:59.160 only were I I would say respects maybe associated with 0:02:59.160 --> 0:03:01.560 spect of XI, I think they were associated to with 0:03:01.639 --> 0:03:04.440 like shady companies that it's like, Okay, if you had 0:03:04.480 --> 0:03:07.320 a asset, if you had a company that couldn't do 0:03:07.440 --> 0:03:11.640 the typical I P O route, couldn't really withstand scrutiny, 0:03:11.800 --> 0:03:13.799 maybe you try to take it public via s back. 0:03:13.880 --> 0:03:16.760 And I think it's sort of like, you know, the 0:03:16.760 --> 0:03:20.720 they didn't leave a good uh flavor taste in people's mouth. 0:03:21.200 --> 0:03:23.560 And I think that's changed. And I think that one 0:03:23.560 --> 0:03:24.919 of the things that we saw this year is like 0:03:25.080 --> 0:03:30.200 more seeming higher quality assets came public. That way, more 0:03:30.560 --> 0:03:35.240 UM investors and banks with sort of a reputable or 0:03:35.320 --> 0:03:39.960 strong reputations willing to or eager to use these type 0:03:39.960 --> 0:03:44.680 of financing capital markets vehicle for this, and so maybe 0:03:44.800 --> 0:03:49.080 they're they're shedding some of their previous reputation, which was 0:03:49.880 --> 0:03:54.000 sort of not that shedding the spack stigma, shedding the 0:03:54.040 --> 0:03:56.480 spec that's well put, shedding the spack stigma. I mean, 0:03:56.600 --> 0:03:59.920 we'll see. I mean, who knows, maybe we'll look back 0:04:00.120 --> 0:04:02.560 the class of twenties SPACs and they all have flopped. 0:04:02.680 --> 0:04:04.920 There have been some flops, I mean, like you know, 0:04:04.920 --> 0:04:09.880 obviously not flops, but you know, controversies. Nicola was a 0:04:10.040 --> 0:04:12.640 very popular spect that surged to the moon for a 0:04:12.680 --> 0:04:15.440 while and then all kinds of questions rose about it's 0:04:15.480 --> 0:04:19.120 business and it's CEO left. So there's still like lots 0:04:19.120 --> 0:04:23.040 of questions about the types of companies coming public this way, 0:04:23.080 --> 0:04:26.320 but it's certainly am It does not seem to be 0:04:26.360 --> 0:04:30.200 going away anytime soon, which means we need to learn 0:04:30.200 --> 0:04:33.680 more about learn more about them. Yeah, I agree, let's 0:04:33.680 --> 0:04:36.520 do it. So we're gonna talk about spacks. We're also 0:04:36.640 --> 0:04:39.600 just gonna be talking about the extraordinary moment for capital 0:04:39.760 --> 0:04:43.680 markets in general. I'm very excited about today's guest. We're 0:04:43.680 --> 0:04:46.880 gonna be speaking with Larry weasonek key is uh for 0:04:46.920 --> 0:04:49.280 the last three years, he's been the co president at 0:04:49.360 --> 0:04:53.359 Cowen and Company and has a long career doing global 0:04:53.440 --> 0:04:57.720 capital markets at Lehman, Barclays and so forth. And so 0:04:57.880 --> 0:05:01.560 I'm going to get the lay of the land. M Larry. So, Larry, 0:05:01.600 --> 0:05:05.120 thank you very much for joining us. Well, Joe Chacey, 0:05:05.200 --> 0:05:07.560 thanks for allowing me to join. You really appreciate it. 0:05:09.080 --> 0:05:10.880 I'm trying to think where to start, But what do 0:05:10.960 --> 0:05:13.640 you sort of what do you do at counting company? 0:05:13.720 --> 0:05:18.120 Describe counting companies sort of role and your role within 0:05:18.160 --> 0:05:22.160 the bank. Sure, well, look I'll start with COUN is 0:05:22.200 --> 0:05:26.279 a you know, hundred plus a year old institution, UH 0:05:26.320 --> 0:05:30.680 that really was in some respects reborn about ten years 0:05:30.680 --> 0:05:35.520 ago when the old Cowen, which had been bought about 0:05:35.560 --> 0:05:39.120 two decades ago by sak Chen, had been spun out 0:05:39.640 --> 0:05:41.760 and went into the financial crisis, probably a little bit 0:05:41.839 --> 0:05:46.159 too small and too narrow to navigate the period of 0:05:46.160 --> 0:05:48.840 O eight and O nine, and it ended up merging 0:05:49.040 --> 0:05:53.599 with a alternative asset manager, Ramius. And so the current 0:05:53.640 --> 0:05:56.120 coun is really about ten years old, and the combination 0:05:56.160 --> 0:05:58.920 of the legacy of what was Ramius and what was 0:05:59.000 --> 0:06:02.360 count at that point and really over the last decade 0:06:02.760 --> 0:06:05.920 the firm's grown enormously and we're but but nonetheless we're 0:06:05.920 --> 0:06:11.919 a pretty targeted institution. We're about people, UH, and we 0:06:12.040 --> 0:06:16.400 focus uh disproportionately, although not exclusively, uh in on the 0:06:16.480 --> 0:06:22.040 US markets and in particular on the arenas of equities, credit, 0:06:22.680 --> 0:06:27.400 and banking delivered to UH not only but again predominantly 0:06:28.040 --> 0:06:31.479 growth sectors of the economy. UH. And in addition, we 0:06:31.520 --> 0:06:34.800 have an asset management business, which is the remnants of 0:06:34.800 --> 0:06:37.840 what was ramious UH, where we also try in as 0:06:37.880 --> 0:06:40.880 much as we can, focus on areas where where we 0:06:41.000 --> 0:06:44.520 have a core strength and knowledge base UM, and again 0:06:44.520 --> 0:06:49.800 it tilts more towards disruptive areas. So with your advisory 0:06:49.839 --> 0:06:54.039 hat on, I'd be really curious to hear um what 0:06:54.120 --> 0:06:58.159 you've heard from clients in so you have a really 0:06:58.160 --> 0:07:03.560 good perspective on what corporates are basically looking for, what 0:07:03.600 --> 0:07:08.560 they've experienced in a really strange year that I think 0:07:08.760 --> 0:07:12.040 was probably marked by a real sense of urgency when 0:07:12.040 --> 0:07:15.480 it came to raising funding around springtime during the worst 0:07:15.480 --> 0:07:17.560 of the market sell off, and then we've sort of 0:07:18.000 --> 0:07:22.560 segued into a moment where people are talking about bubbly markets, 0:07:22.640 --> 0:07:26.160 excess liquidity slashing in the system, and this idea that 0:07:26.280 --> 0:07:30.440 capital is sort of free and available to everyone. I'd 0:07:30.440 --> 0:07:32.560 be curious if you could give us some some color 0:07:32.920 --> 0:07:36.120 on what you've seen. Well, Chacy, it's a It's a 0:07:36.120 --> 0:07:38.000 great question and one that would take a lot longer 0:07:38.040 --> 0:07:41.520 than the podcast to answer, but I'll try and maybe 0:07:42.040 --> 0:07:44.760 pick a few core elements and then we can delve 0:07:44.840 --> 0:07:47.800 into it deeper. I think the first is that, having 0:07:47.840 --> 0:07:50.840 been around the capital markets now for longer than i'd 0:07:50.840 --> 0:07:54.840 like to remember, it's always been the case that we're 0:07:54.880 --> 0:08:00.520 reminded in periods of dislocations of how strategic financing decisions 0:08:00.520 --> 0:08:06.160 of the past actually are um when challenges come about 0:08:06.320 --> 0:08:09.680 in the broad economy and the capital markets and specific 0:08:10.320 --> 0:08:13.360 many a time in good times, folks believe that the 0:08:13.520 --> 0:08:16.480 financing decisions are a choice for the treasurer or the 0:08:16.480 --> 0:08:20.520 assistant treasurer. It's not a boardroom kind of conversation. And 0:08:20.560 --> 0:08:24.200 that always comes to roost when we hit difficult times. 0:08:24.200 --> 0:08:27.160 And that's true whether you look back in the seventies, 0:08:27.560 --> 0:08:30.640 the late eighties around the SNL crisis, whether we look 0:08:30.640 --> 0:08:33.599 at the Internet bubble, whether we look at o A. 0:08:34.280 --> 0:08:38.360 Those who didn't set up their foundation with a strong 0:08:38.880 --> 0:08:40.120 you know, think of it as you have to build 0:08:40.120 --> 0:08:42.200 the basement first, then build the first floor, then the 0:08:42.240 --> 0:08:45.560 second floor. The capital structure of a company is that 0:08:45.840 --> 0:08:49.200 is that that basement, that first floor, the foundation. And 0:08:49.240 --> 0:08:52.440 so what we saw when we hit March, and we 0:08:52.520 --> 0:08:56.560 saw the beginnings of the acknowledgement of what the pandemic 0:08:56.640 --> 0:09:01.240 might be. Is many companies found themselves is where either 0:09:01.600 --> 0:09:05.360 their plan on the business side was being blown up 0:09:06.200 --> 0:09:08.439 or maybe their business was actually gonna be able to 0:09:08.480 --> 0:09:11.680 be somewhat resilient, but they were worried that the financing 0:09:11.720 --> 0:09:15.319 plan that they had set in place to help them 0:09:15.360 --> 0:09:18.000 with the business side wasn't as robust as they thought. 0:09:18.440 --> 0:09:20.160 And what am I gonna do if I want to 0:09:20.160 --> 0:09:22.640 grow any more capital and I don't have it on hand? 0:09:23.120 --> 0:09:25.839 That was a big question that was you know, in 0:09:25.960 --> 0:09:28.280 every board room in in in March or April. So 0:09:28.679 --> 0:09:32.640 I like to say financing is always strategic, but we're 0:09:32.640 --> 0:09:37.760 remind of that when we hit difficult times. So we 0:09:37.920 --> 0:09:42.600 mentioned that, you know, especially the second half of sort 0:09:42.640 --> 0:09:46.000 of turned into the year of the Spack unexpectedly just 0:09:46.080 --> 0:09:49.640 an absolute boom trade. You mentioned it bigger, more money 0:09:50.080 --> 0:09:52.800 through these vehicles than than I think the last ten 0:09:52.880 --> 0:09:57.160 years combined. When from that perspective that you described that 0:09:57.280 --> 0:10:01.880 financing decisions must be sort of strategic to the company, 0:10:02.480 --> 0:10:06.080 what was it about this moment in particular that's like 0:10:06.320 --> 0:10:08.880 this is the vehicle for right now. What is it 0:10:08.920 --> 0:10:10.960 on sort of the investor side of the people you 0:10:11.000 --> 0:10:13.000 saw want to put money to work in this way, 0:10:13.000 --> 0:10:15.080 that they're willing to buy into these And what was 0:10:15.120 --> 0:10:18.439 it on the sort of the cell side, Uh, that 0:10:18.480 --> 0:10:22.080 there were um companies that were ready to and eager 0:10:22.120 --> 0:10:26.400 to go public through this route. Yeah, well, you know, 0:10:26.880 --> 0:10:29.559 I like the way you actually even coined the question, 0:10:29.559 --> 0:10:32.120 which is the two sides of it, which is what 0:10:32.160 --> 0:10:36.160 were the issues why people would finance the SPACs? And 0:10:36.200 --> 0:10:40.280 then why why do companies sell into spac And I 0:10:40.320 --> 0:10:43.400 think that the first thing to recognize is for many 0:10:43.440 --> 0:10:46.800 folks who have not been around the capital markets, they 0:10:46.840 --> 0:10:49.680 see all of a sudden on Bloomberg, you know, all 0:10:49.679 --> 0:10:52.240 these SPACs being done, and they think that this is 0:10:52.520 --> 0:10:55.520 some kind of new creation. The reality is SPACs have 0:10:55.600 --> 0:10:58.880 been around in one form of another for more than 0:10:58.920 --> 0:11:02.640 twenty years. And everything about blank check corporations they go back, 0:11:02.679 --> 0:11:04.640 you know, you can go back to the twenties and 0:11:04.679 --> 0:11:08.520 thirties of the last century and they were blank check companies. 0:11:08.800 --> 0:11:10.760 So like a lot of financial engineering or a lot 0:11:10.760 --> 0:11:15.400 of financial structures, the market and the technology have to 0:11:15.440 --> 0:11:20.160 align for them to become broadly utilized. And I think 0:11:20.240 --> 0:11:23.760 that's something that when we look back at two twenty, well, 0:11:23.960 --> 0:11:27.040 the question really is why in two twenty did they 0:11:27.040 --> 0:11:31.560 line up so well that it became commonplace? And I 0:11:31.600 --> 0:11:35.480 think that goes to this issue of the financing is 0:11:35.480 --> 0:11:41.559 strategic question, which is that up until February of this year, 0:11:41.600 --> 0:11:44.200 i'd say most of your listeners had never heard of 0:11:44.240 --> 0:11:47.320 us back and then something changed. And what changed was 0:11:47.880 --> 0:11:54.920 that for particularly very very um growth oriented companies, companies 0:11:54.920 --> 0:11:57.440 that maybe in the past would have gotten their next 0:11:57.480 --> 0:12:00.520 round of funding in the private market and did another 0:12:00.600 --> 0:12:04.600 year or two before going public, what happened was the 0:12:04.640 --> 0:12:09.200 private market ostensibly dried up UM. And what I'm about 0:12:09.240 --> 0:12:12.600 to say here is true both about venture backed opportunities, 0:12:12.840 --> 0:12:15.240 but also it was true in the p world. So 0:12:15.280 --> 0:12:18.880 if you look at general private equity investment, when when 0:12:18.920 --> 0:12:22.840 sitting around with you know, financial sponsors in March and April, 0:12:23.120 --> 0:12:24.720 I can tell you the one thing they weren't talking 0:12:24.760 --> 0:12:27.400 about was how they were deploying a new capital. They 0:12:27.400 --> 0:12:31.000 were focused on their existing portfolio. So with that going on, 0:12:31.480 --> 0:12:33.800 if you're the CEO and the board of a company, 0:12:33.840 --> 0:12:38.559 that your growth plans are potentially even taking off because 0:12:38.920 --> 0:12:42.040 maybe you have a product offering that is actually going 0:12:42.120 --> 0:12:45.240 to benefit from the pandemic. It could be disruptive consumer, 0:12:45.800 --> 0:12:48.760 it could be in things like sustainable energy, where it 0:12:48.800 --> 0:12:52.920 could be in areas like uh, you know, energy transition, 0:12:53.360 --> 0:12:58.080 where those opportunities are really unaffected, where they're accelerated potentially 0:12:58.120 --> 0:13:01.640 by the events of what's happened in the pandemic. But 0:13:01.720 --> 0:13:04.400 you don't have the funding you need in that scenario, 0:13:04.920 --> 0:13:09.160 all of a sudden, privately negotiated transaction with an entity 0:13:09.200 --> 0:13:13.920 that brings capital to bear becomes very interesting. And because 0:13:13.920 --> 0:13:16.040 of a number of other developments in the eighteen months 0:13:16.080 --> 0:13:18.200 prior as to how deals were getting done in this 0:13:18.240 --> 0:13:22.480 back market, it allowed for a path to real capital 0:13:22.520 --> 0:13:25.280 for the companies UM, so long as they were public 0:13:25.559 --> 0:13:28.959 public market ready, And that's where the period of kind 0:13:29.000 --> 0:13:33.400 of the second quarter really changed things. What does public 0:13:33.440 --> 0:13:37.760 market ready actually mean in this context, because again I 0:13:37.840 --> 0:13:40.600 think Joe mentioned this in the intro, but when a 0:13:40.600 --> 0:13:43.040 lot of people hear the words facts, they think that 0:13:43.120 --> 0:13:47.280 this is basically a way of UM sort of listing light. 0:13:47.559 --> 0:13:51.760 You don't have as strict disclosure requirements and maybe you 0:13:51.760 --> 0:13:54.520 can get away with a few things like using forward 0:13:54.559 --> 0:13:57.200 earnings projections and things like that that you wouldn't be 0:13:57.200 --> 0:14:00.040 able to do if you went down the traditional A 0:14:00.080 --> 0:14:03.880 PEO process listening. I think it's a really interesting point 0:14:03.920 --> 0:14:07.240 that as we sit here today looking back on twenty 0:14:07.559 --> 0:14:10.760 we can say that the events of I wouldn't just 0:14:10.840 --> 0:14:13.800 say two, I'd say nineteen as well as we started 0:14:13.840 --> 0:14:17.160 seeing some real significant increase in direct listings. What we 0:14:17.160 --> 0:14:20.480 would say is companies that want to go public in 0:14:20.520 --> 0:14:23.920 the US now have three paths available to them. They 0:14:23.960 --> 0:14:26.040 have standard I p O s with all of the 0:14:26.080 --> 0:14:30.440 regular structures around that, they have direct listings, and they 0:14:30.480 --> 0:14:34.040 have sale to US back. And so I'll address particularly 0:14:34.040 --> 0:14:36.680 your question about sale to US back, but broadly speaking, 0:14:36.680 --> 0:14:40.080 I'd say a market where there's more choices and companies 0:14:40.120 --> 0:14:43.560 can match what they feel is appropriate for them to 0:14:43.880 --> 0:14:48.280 the best path um is probably a better market overall. 0:14:48.440 --> 0:14:51.280 It's a more complete market. And again we're not here 0:14:51.280 --> 0:14:52.600 to talk about direct listings, but there are a lot 0:14:52.600 --> 0:14:54.640 of folks who are big advocates for that as well 0:14:54.680 --> 0:14:59.160 as an alternative on this back front. I think probably 0:14:59.200 --> 0:15:03.440 the two elm monts that were the biggest beneficiaries for 0:15:03.520 --> 0:15:08.240 companies thinking about going to the market that broadened. It 0:15:08.360 --> 0:15:11.920 was one the fact that they can use forward projections. 0:15:12.440 --> 0:15:15.120 And so we have to think about the world of 0:15:15.440 --> 0:15:19.120 a company that is investing for the future, that is 0:15:19.200 --> 0:15:25.480 has limited cash flows today and historically would be challenged 0:15:25.520 --> 0:15:27.960 to get that story across to the public market. And 0:15:27.960 --> 0:15:30.120 the reason it will be a challenge is they have 0:15:30.240 --> 0:15:34.320 to rely on historical numbers, which might be just investing 0:15:34.640 --> 0:15:36.280 cement in the ground or whatever it might be to 0:15:36.320 --> 0:15:39.120 build that business, and they might be a number of 0:15:39.200 --> 0:15:43.200 years away from having real cash flows or significant revenues 0:15:44.080 --> 0:15:48.560 when you have the ability to use forward projections. And 0:15:48.600 --> 0:15:51.360 then an important part of the second piece. Many of 0:15:51.360 --> 0:15:54.240 these deals, the way that they get done is in 0:15:54.360 --> 0:15:57.360 front of the um deal being announced, the m and 0:15:57.400 --> 0:15:59.920 A deal being announced, they line up a pipe and 0:16:00.000 --> 0:16:05.400 investment from a series of institutional investors, and those investors 0:16:05.640 --> 0:16:09.160 have the opportunity to look at those forward projections, to 0:16:09.280 --> 0:16:12.640 meet with management and have in depth conversations, much more 0:16:12.640 --> 0:16:15.480 in depth conversations then they could have in an I 0:16:15.560 --> 0:16:18.800 p O process. So if you think of it, think 0:16:18.800 --> 0:16:21.280 of the lead investors in an I p O is 0:16:21.320 --> 0:16:24.960 being similar to the lead investors in a pipe tied 0:16:25.000 --> 0:16:27.880 to a SPACK deal. The difference is there's a lot 0:16:27.920 --> 0:16:31.240 more education that goes on for that pipe investor in 0:16:31.280 --> 0:16:34.640 a SPACK than they get in an I p O process. 0:16:34.680 --> 0:16:38.720 So for a company who's forward or their future is 0:16:38.880 --> 0:16:41.760 fairly different than maybe what their history was because of 0:16:41.760 --> 0:16:46.600 where they are in their evolution, that process allows them 0:16:46.640 --> 0:16:51.680 to raise capital from these pipe investors, which then when 0:16:51.720 --> 0:16:57.680 that's lined up, that's when they have completed the necessary 0:16:57.720 --> 0:17:01.000 requirements to sign a merger agree and that's when the 0:17:01.000 --> 0:17:03.560 deal gets announced, and then months later the deal closes 0:17:03.960 --> 0:17:06.560 and ultimately it starts to trade in the public market. 0:17:07.080 --> 0:17:11.200 That process that moves forward, that discussion with investors comes 0:17:11.240 --> 0:17:14.080 up with what price is a clearing price and allows 0:17:14.119 --> 0:17:17.720 them to have certainty before they announce. It is extraordinarily 0:17:17.800 --> 0:17:21.439 interesting too many companies. And it's not just because they 0:17:21.440 --> 0:17:25.240 can use forward projections. It's that they minimize the many 0:17:25.280 --> 0:17:29.480 many months of risk that's involved in a standard IPO process, 0:17:29.640 --> 0:17:32.520 where when they finally go to the market, if the 0:17:32.600 --> 0:17:36.040 market's not there for them they had timing, etcetera, they 0:17:36.040 --> 0:17:39.320 have a failed i PO. When you have this negotiated 0:17:39.400 --> 0:17:42.639 process with the spack and with the pipe investors, that 0:17:42.720 --> 0:17:46.280 predates the merger agreement being announced. If the deal doesn't 0:17:46.280 --> 0:17:49.119 come together, the market doesn't know about it. It was 0:17:49.160 --> 0:17:52.240 never out there. You don't have all the embarrassment of 0:17:52.280 --> 0:17:54.600 a I p O getting priced at the you know, 0:17:54.680 --> 0:17:56.840 below the range whatever it is, and that has an 0:17:56.840 --> 0:18:00.640 appeal to a certain percent of the core puts out there. 0:18:00.800 --> 0:18:04.240 Certainly not everyone's still a very robust I PO uh 0:18:04.280 --> 0:18:24.280 you know uh market, but for some companies a better path. So, 0:18:24.680 --> 0:18:29.360 you know, it's interesting you talking about transformative technologies, new technologies. 0:18:29.720 --> 0:18:33.639 There have been a lot in UM the electric vehicle, 0:18:33.880 --> 0:18:39.040 autonomous vehicle, space vehicle tech, clean energy, many of the companies. 0:18:39.240 --> 0:18:41.879 It's not just that the future is not going to 0:18:41.960 --> 0:18:44.720 resemble the past, it's that there's almost no present. Maybe 0:18:44.720 --> 0:18:48.040 it's just a technology still in commercialization or with revenue 0:18:48.040 --> 0:18:50.120 expected to be a few years off. You know. I'm 0:18:50.160 --> 0:18:51.760 thinking about like one of the big I p o s, 0:18:51.800 --> 0:18:56.160 for example of this year, the software company Snowflake, which 0:18:56.160 --> 0:18:59.320 has a real business UM but still being valued at 0:18:59.400 --> 0:19:02.879 sort of multiples and expectations way into the future. And 0:19:02.920 --> 0:19:05.680 maybe someone just drew ruler and sort of projected where 0:19:05.680 --> 0:19:08.199 their earnings are going to be and are coming up 0:19:08.200 --> 0:19:12.680 with a multiple on that. Is there something fundamentally different? 0:19:12.720 --> 0:19:15.680 I mean, all companies are, all growth tech companies are 0:19:15.720 --> 0:19:19.480 fundamentally you know about the future. Is there something fundamentally 0:19:19.520 --> 0:19:24.200 different about say a company that has some projectable business 0:19:24.359 --> 0:19:29.960 like an enterprise software company versus a transformative or new 0:19:30.040 --> 0:19:33.760 tech in which there's nothing really even to extrapolate yet 0:19:34.160 --> 0:19:37.480 in terms of why the spack route may make sense 0:19:37.520 --> 0:19:40.919 for them, whereas something is slightly more predictable and established 0:19:41.119 --> 0:19:43.040 the I p O route makes sense for the for 0:19:43.080 --> 0:19:46.199 them like like a snowflake. Yeah, I do. I do 0:19:46.320 --> 0:19:49.199 think that you highlight an interesting point, which is and 0:19:49.240 --> 0:19:51.879 it maybe gets a bit more to the value of 0:19:51.880 --> 0:19:57.680 the spack team and why when companies look to sell 0:19:57.800 --> 0:20:01.119 these days, they're often doing what has become known as, 0:20:01.160 --> 0:20:03.920 in quotes, a spack off. I want to talk about 0:20:03.920 --> 0:20:06.440 spa off. Yeah, they're not necessarily responding to the first 0:20:06.480 --> 0:20:09.320 spact that that calls them up. And the reason for 0:20:09.400 --> 0:20:13.960 that is that you're exactly right. If you're a company 0:20:14.000 --> 0:20:17.119 that is now getting to choose how you're going to 0:20:17.320 --> 0:20:20.679 enter the marketplace, let's just compare that that's sack the 0:20:20.760 --> 0:20:24.080 company and their board looking at selling to a SPACK 0:20:24.640 --> 0:20:27.359 to going the I p O path. One of the 0:20:27.359 --> 0:20:28.880 things they would do in an I p O path 0:20:29.040 --> 0:20:32.280 is they would think through, I probably need to bring 0:20:32.359 --> 0:20:36.040 different people onto my board as a public company than 0:20:36.080 --> 0:20:38.640 I would have when I was a private company. Maybe 0:20:38.720 --> 0:20:40.720 some of the vcs are going to come off the 0:20:40.760 --> 0:20:43.479 board and we're gonna put some, you know, folks who 0:20:43.560 --> 0:20:47.399 have more public market experience onto the board. When selling 0:20:47.440 --> 0:20:49.720 to a SPACK, I can do that, and I can 0:20:49.720 --> 0:20:54.080 do that by selecting a SPACK that has expertise in 0:20:54.080 --> 0:20:57.080 my area. So let's just say, for example, I'm in 0:20:57.119 --> 0:21:01.800 one of those hyper change arenas. I'd rather sell if 0:21:01.800 --> 0:21:05.720 I'm a financial tech company to a SPACT that has 0:21:06.040 --> 0:21:10.959 some significant fintech executives involved with it, because I'm basically 0:21:11.000 --> 0:21:14.080 picking at a minimum to new board members, but one 0:21:14.160 --> 0:21:16.760 or two depending on the structure, but two new board 0:21:16.800 --> 0:21:19.640 members for now when I'm a public company, who's gonna 0:21:19.640 --> 0:21:22.399 have oversight of the company. And so one of the 0:21:22.440 --> 0:21:24.720 things that is really important is what does the SPAC 0:21:24.800 --> 0:21:27.399 bring to the table. What are the backgrounds of the 0:21:27.480 --> 0:21:30.280 folks from the spack who will ultimately go on my board. 0:21:31.320 --> 0:21:34.280 Maybe it's they have real good connections in the industry 0:21:34.320 --> 0:21:37.440 I'm selling to and they will help accelerate my business. 0:21:37.480 --> 0:21:40.280 So the decision of what SPAC will I sell to 0:21:40.880 --> 0:21:45.320 becomes very similar to what private equity fund would I 0:21:45.320 --> 0:21:48.200 sell to if as going private or if I have 0:21:48.240 --> 0:21:50.560 a choice of growth equity funds. So I'm now doing 0:21:50.600 --> 0:21:53.920 growth equity round in the private market. Um, who would 0:21:53.920 --> 0:21:56.000 I want to come in to be my partner for 0:21:56.000 --> 0:21:59.399 the next five years. So think of that process of 0:21:59.400 --> 0:22:03.639 selecting a spack that company sells to as who is 0:22:03.680 --> 0:22:08.000 going to be part of my oversight and part of 0:22:08.000 --> 0:22:12.159 my ecosystem to help me complete my plans. Because all 0:22:12.200 --> 0:22:13.480 these companies, what they really want to do in the 0:22:13.480 --> 0:22:17.400 public market is basically execute on their plan. And that's 0:22:17.440 --> 0:22:21.360 why SPACs that have a lot of expertise are emerging 0:22:21.400 --> 0:22:25.080 as being, you know, honestly better bidders than those who 0:22:25.160 --> 0:22:28.359 are just you know, a few folks have come together 0:22:28.400 --> 0:22:32.479 to try and put some capital to work. So just 0:22:32.600 --> 0:22:34.600 on the spack off point, I mean, one of the 0:22:34.640 --> 0:22:37.520 things you you're an analogy to private equity. Just then, 0:22:37.560 --> 0:22:39.960 one of the things we heard about private equity in 0:22:40.240 --> 0:22:44.640 the latest cycle is that targets became fewer and fewer 0:22:45.119 --> 0:22:48.440 as as there was more money poured into alternative assets. 0:22:49.160 --> 0:22:53.240 As the spack space heats up, and you know, lots 0:22:53.240 --> 0:22:55.359 of people are setting these up and lots of people 0:22:55.359 --> 0:22:59.320 are looking for targets to to merge with. Um how 0:22:59.359 --> 0:23:02.080 competitive of is it at the moment? And you know, 0:23:02.200 --> 0:23:05.080 like what is a spack off actually look like in 0:23:05.440 --> 0:23:09.800 your experience? Like everything else, It's almost like if you say, 0:23:10.400 --> 0:23:13.560 if you've met one family office, you've met one family office. 0:23:13.680 --> 0:23:15.879 Or SAM could be said about private equity, SAM can 0:23:15.920 --> 0:23:19.520 be said about how how a company decides to run 0:23:19.560 --> 0:23:22.879 there what's really an M and A process which is 0:23:22.880 --> 0:23:25.159 a back off the differences, and this is important for 0:23:25.160 --> 0:23:28.760 your listeners to understand. Unlike a normal M and A 0:23:28.880 --> 0:23:32.639 process where the deal ends when the other side says 0:23:33.000 --> 0:23:35.240 I'm willing to buy you at a price and he 0:23:35.400 --> 0:23:38.800 and I have a money good in a spack, the 0:23:38.880 --> 0:23:41.879 capital markets decide whether that's a proper deal or not 0:23:42.359 --> 0:23:45.359 because it has to be funded. And and that's where 0:23:45.680 --> 0:23:48.080 the combination of what's known as the d spack the 0:23:48.119 --> 0:23:50.720 process where the original investors in the spacks, or at 0:23:50.760 --> 0:23:52.880 least those who are still holding it at the time 0:23:52.880 --> 0:23:55.320 a deal is announced, they get to decide whether or 0:23:55.320 --> 0:23:58.280