Anyone Who’s Anyone Has a SPAC Right Now

Also known as “blank check companies”, SPACs are In its current form since the 1990s, And has been seen as a crisis-ridden backwater of the finance industry for years, but has caught fire during the epidemic. And the SPAC craze is only growing: SPACs raised $ 42.7 billion in the first six weeks of 2021, more than half of what it was last year, According to the financial times.

So why are celebrities jabbing at the bandbars? To be rich, of course.

Barry Ritholtz, President and Chief Investment Officer Ritholtz Wealth Management And a scholar from Wall Street explained the play. “I think some business managers tell them, ‘Hey, listen, this is the new financial proposal. Let’s put our name and celebrity on it.'” “You’re going to bring some fairy dust to an SPAC and The potential reversal is tens if not hundreds of million dollars. “

Celebrities are not financial decision makers, but rather promoters brought in to attract investors (“strategic advisors, in prospectus parlance”). Like marketers of soft drinks or sneakers, SPAC managers are tapping the power of celebrity to sell a product – in this case, a financial tool comparable to The New York Times “Empty shell. “

Hypothetically, assume that a SPAC costs $ 10 per share, and raises $ 500 million in public markets. If a celebrity consultant negotiated 1 percent of that deal, they are rewarded with a stake in the company, which is valued at $ 5 million. But now suppose that the same SPAC finds a candidate with a successful merger, brings in other investors and a deal is made for $ 10 billion. Celebrity’s 1 percent stake gave him (on paper) a pennant of $ 100 million.

Originally, risking his reputation for celebrities, let’s say, initially a few million dollars, “but if it works, it’s $ 100 million,” Mr. Ritholtz said. “Man loves odd risk-reward situations.”

He added, “I can’t believe we haven’t seen a Kim Kardashian SPAC yet.”

Not unlike the stock market boom during a global pandemic, SPAC is a silly, absurd attribute to the term, lending itself to jargon: SPAC- Great! SPAC-Elastic! This was a false branding opportunity Mr. O’Neill’s Investment Vehicle Was named Forest Road Acquisition Corp. and not Shake SPAC.

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