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Speaker 1: There was a story I saw on Bloomberg News.
Speaker 2: I think it was actually yesterday.
Speaker 1: It noted that the price of new initial public offerings
Speaker 1: in the formation of blank check vehicles, which we were
Speaker 1: talking about.
Speaker 2: I feel like, go back a couple of years.
Speaker 3: They're very in vague.
Speaker 2: Yes, have both.
Speaker 1: Picked up amid a lukewarm market for non spac us
Speaker 1: IPO SO a kidence of ten to fifteen new SPACs
Speaker 1: per quarter, which strike a delicate balance offering an alternative
Speaker 1: to traditional first time share sales without inviting comparisons to
Speaker 1: the mania and the go go stretch from twenty twenty
Speaker 1: to twenty twenty one.
Speaker 2: Go back right off the pandemic.
Speaker 1: It felt like everybody and anybody, many celebrities, everybody was
Speaker 1: starting a spac, A lot of.
Speaker 3: Spacks, a lot of people learning what the phrase means.
Speaker 3: Our next guest has some thoughts on the IPO and
Speaker 3: SPACK markets. Back with us is Spell Freedheim, the founder
Speaker 3: and CEO of Athena. It's an all women led spack
Speaker 3: platform to talk to us to why she thinks the
Speaker 3: SEC is stifling the IPO come back. She's showing us
Speaker 3: today from Lima.
Speaker 2: Place Special Purpose Acquisition view.
Speaker 3: Thank you so much. You better than I, Betty, I
Speaker 3: should say, yeah, is well, just give us the lay
Speaker 3: of the land here. I mean, interest rates are still
Speaker 3: high relatively speaking. But our colleague Preston Brewer Bloomberg Law,
Speaker 3: writing about how he thinks the ipo market has kind
Speaker 3: of turned a corner here we are seeing more of them,
Speaker 3: seeing larger ones. What's your read of sort of where
Speaker 3: we are in the bounce back of the ipo market.
Speaker 4: Thanks David. The ipo market is turning a corner. Indeed,
Speaker 4: we have seen in the last few months a number
Speaker 4: of high profile IPOs that have done decently well in
Speaker 4: the market. But to your point, interest rates continue to
Speaker 4: be high, as does inflation. So it is it is,
Speaker 4: and hopefully it won't be the case that the Fed
Speaker 4: wall turn change interest rates from in a pattern that
Speaker 4: will go up and down, So we expect for now
Speaker 4: interest rates to continue to be steady for the most part.
Speaker 4: The ipo market itself is a reflection of investor sentiment,
Speaker 4: and it has been the case in the last three years,
Speaker 4: and to your point, has been to the detriment of SPACs.
Speaker 4: Unfortunately that investors have taken a risk off posture when
Speaker 4: it comes to making investments in companies that are cash burning,
Speaker 4: companies that are high growth, typically tech or climate sectors.
Speaker 4: So we're seeing less of those going public now or
Speaker 4: going public respects, and we are seeing more companies that
Speaker 4: are cash flow positive with industry tailwinds. But we're not
Speaker 4: going to get there yet because there continues to be
Speaker 4: a lot of volatility in the market, and I think
Speaker 4: that will continue to be the case until the elections
Speaker 4: and up until twenty five.
Speaker 2: Is a bit.
Speaker 1: I feel like we talk about SPACs, it's like it
Speaker 1: just goes through these cycles where everybody kind of you know,
Speaker 1: they start, we start talking about them, there's interest, everybody
Speaker 1: plows into them, then everybody backs off because they don't perform.
Speaker 1: So I don't know, how do you make sense of
Speaker 1: Is there a healthy SPAC cycle?
Speaker 4: Yeah, there is a healthy SPA. SPACs continue to play
Speaker 4: a purpose in the market. There continue to be good
Speaker 4: for some companies. There has been there have been abuses,
Speaker 4: And to your prior question on the SEC, the SEC
Speaker 4: was very quick to jump on SPACs because of the
Speaker 4: amounts of capital that were flowing into SPAC products, which
Speaker 4: frankly has never been the SEC's mandates. So the SEC,
Speaker 4: broadly speaking and not that's not just true for SPACs,
Speaker 4: it's true for other areas of the market as well.
Speaker 4: It is in a way stifling companies' access to public
Speaker 4: market by making it so difficult and so overregulated to
Speaker 4: go public. And that's whether it's through a SPAC, through
Speaker 4: an IPO, through a direct listing, and that's not new
Speaker 4: the administration currently, the SEC administration has has made it worse.
Speaker 4: Certainly in the last couple of years. It's not clear why,
Speaker 4: frankly and whether they're addressing, but it has been twenty
Speaker 4: years now that the regulatory environment in the US has
Speaker 4: made it difficult and costly for companies to access to
Speaker 4: public equity markets.
Speaker 1: And yeah, you know, I'm going to say, David, you know,
Speaker 1: I it felt like for many years that the reason
Speaker 1: companies weren't going public is because they didn't need to.
Speaker 1: There were so much money in the private markets that
Speaker 1: they could stay private for an extended period of time,
Speaker 1: and in some ways that creates I feel like healthier companies,
Speaker 1: or some market observers would say that you stay private
Speaker 1: for longer you do create a company that has a
Speaker 1: sustainable business model.
Speaker 3: A fascinating point. Go ahead, yeah, chip in.
Speaker 4: When you have a strong private equity market short but
Speaker 4: the venture capital industry exists because of exit opportunities that
Speaker 4: can lead to private equity, but also primarily to the
Speaker 4: public market. So not only is it difficult for companies
Speaker 4: to access to public equity market. Remember the number of
Speaker 4: publicly traded companies has consistently gone down now almost ninety
Speaker 4: percent in the last thirty years, and there needs to
Speaker 4: be a recovery. And that's the role That'spax played at
Speaker 4: some point. But of course we've been operating in a
Speaker 4: challenging market. But there needs to continue to be access
Speaker 4: to capital beyond what the venture capital industry can offer
Speaker 4: to technology companies to fond innovation, because capital is the
Speaker 4: life blood of innovation. The United States has land for
Speaker 4: many years in that respect, and in the absence of
Speaker 4: exit opportunities, we're stifling access to capital, both in venture
Speaker 4: capital and in the public equity markets, and access for
Speaker 4: tech companies to the public equity markets. It's not just tech,
Speaker 4: it's life sciences, climate companies that will solve tomorrow's challenges.
Speaker 3: Is well, I want to ask you just about sort
Speaker 3: of what regulators have said. And Gary Gensler is chief
Speaker 3: among them, who's certainly singled out SPACs as a place
Speaker 3: where he'd like to see the SEC do more. And
Speaker 3: I think one area on which he's focused is disclosure
Speaker 3: that investors don't know enough say about who's sponsoring a
Speaker 3: particular one. Let me step back and ask you, what
Speaker 3: do you think the regulatory framework should look like for SPACs?
Speaker 3: And you've talked a bit about sort of the SEC's
Speaker 3: role in the scrutiny that's applied to special purpose acquisition companies.
Speaker 3: What would you what kind of touch, how light a touch,
Speaker 3: or how have you touched do you think that the
Speaker 3: SEC should have when it comes to these kind of offerings.
Speaker 4: So remember that space exist because they've provided investors in
Speaker 4: twenty nineteen, in twenty twenty with access to high growth companies.
Speaker 4: Investments in those companies is challenging in the private market.
Speaker 4: It's risk key, and spas, in a way, being publicly
Speaker 4: treated companies and taking companies public makes for a much
Speaker 4: less risky investment when you invest in the same company,
Speaker 4: whether it is private in the venture market or as
Speaker 4: a publicly traded company. Now, there were there was a
Speaker 4: point in time when investors couldn't access yield in any
Speaker 4: other product that high growth equities, and that's why they
Speaker 4: piled into SPACs and into the promise of growth and yields.
Speaker 4: Now the yields have shifted and they can be accessed
Speaker 4: now through other products, especially debt right now by it.
Speaker 4: But so there has been a pull back in a
Speaker 4: national adjustment in and uh I would say in over correction,
Speaker 4: but there has been a national adjustment that the SEC
Speaker 4: has no business regulating frankly. I mean, the disclosures is
Speaker 4: one thing to prevent fraud. But the disclosures are there,
Speaker 4: and sure we could. I mean most facts these days
Speaker 4: proactively disclose more information than is regularly than is required
Speaker 4: by regulators, and those are important to protect retail investors
Speaker 4: very much favorite disclosures.
Speaker 1: It's about just got about forty five fifty seconds left here.
Speaker 1: I mean, what is it that we get from for
Speaker 1: companies or for investors, you know via a spack versus
Speaker 1: angel investing or VC investing. And again, we don't have
Speaker 1: a lot of time, unfortunately, you.
Speaker 4: Get the transparency, you get the liquidity, you can sell
Speaker 4: your shares so you cannot sell in an early stage company.
Speaker 4: You again the access to pull disclosures to your point.
Speaker 4: So that's that's taken care.
Speaker 2: Of, all right, Gonna leave it on that note.
Speaker 1: Listen, great to get some time something to think about
Speaker 1: on this Friday, right, And we actually talked to I
Speaker 1: think it was Art and Health yesterday at IPO. So
Speaker 1: we are seeing some things happening in the IPO.
Speaker 2: Market, you know.
Speaker 3: I'm just going back to that article by our colleague
Speaker 3: prest And Brewer at Bloomberg Law. He's saying, you know,
Speaker 3: although they're not among the largest IPOs, biotech companies are
Speaker 3: seeing a resurgence total capital race in the first half
Speaker 3: of this year twenty one point two billion dollars. So
Speaker 3: things directionally seems to be going in the right place.
Speaker 3: But again, this conversation about regulation a royling one has
Speaker 3: been for a few years. And as we talk about
Speaker 3: the election, what might or might not change certainly something
Speaker 3: I think a lot of that's on a lot of voters' minds.
Speaker 2: Absolutely. Isabel Frett Freedheim.
Speaker 1: She is the founder and CEO of Athena the all
Speaker 1: women LEDs Back Platform, joining us from Lima, Peru.
Speaker 2: All right, folks, you are listening and watching Bloomberg BusinessWeek.
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