Pitchforks out for Chamath and SPACs

The SPAC market has lost its luster from its peak earlier this year, but it's a marathon not a sprint and the full story isn't written for the market or its participants yet.
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These days when you see Chamath Palihapitiya in the title of any piece you know it's likely going to try to do two things. First, it will say that SPACs are bad and dead. Second, it will say that Chamath has led his flock of followers astray while he has made substantial profits in the process. Case in point, today's piece in Bloomberg.

We've made similar points before, and are no blind defender of SPAC sponsors, but they ultimately are not in control of (a) where prices go and (b) when investors decide to get on board. The reality is that "peak SPAC" was irrational exuberance manifest. There was very little reason for pre-deal SPACs to trade significantly  above NAV, let alone at the levels that we were seeing. And, for SPACs with deals, the Gamestop mania set in a bit as well -- the narrative became more important than the underlying numbers.

Chamath SPACs
Depending on when investors got in (and out), many will still be happy with how Chamath's slate of SPACs have performed. Clover Health (CLOV), though, may have been a canary in the coal mine and ultimately help to negatively define Chamath's SPAC run. If Virgin Galactic (SPCE)  continues to drop and can't find a way to execute, that combined with Clover may mean we won't see anything past IPOF. Remember, when things were going good, Chamath boasted of a SPAC for every letter of the alphabet... IPOZ one day?

$ 15.50 | IPOA - Social Capital Hedosophia Holdings Corp. | De-SPAC -> Virgin Galactic Holdings, Inc.
$ 14.15 | IPOB - Social Capital Hedosophia Holdings Corp. II | De-SPAC -> OpenDoor Labs Inc.
$ 7.26 | IPOC - Social Capital Hedosophia Holdings Corp. III | De-SPAC -> Clover Health Investments, Corp.
$ 10.15 | IPOD - Social Capital Hedosophia Holdings Corp IV | Pre-Deal
$ 14.61 | IPOE - Social Capital Hedosophia Holdings Corp V | Announced -> Social Finance, Inc.
$ 9.93 | IPOF - Social Capital Hedosophia Holdings Corp VI | Pre-Deal

Chamath PIPEs
Investors will not hold him as closely accountable for SPAC performance when he is solely an investor in the PIPE, but four out of five PIPEs are currently trading below their $10 offer price.

$ 13.30 | ACTC - ArcLight Clean Transition Corp | Announced -> Proterra Inc
$ 9.92 | RAAC - Revolution Acceleration Acquisition Corp | Announced -> Berkshire Grey
$ 9.87 | RMGB - RMG Acquisition Corporation II | Announced -> ReNew Power Private Limited
$ 9.91 | SPRQ - Spartan Acquisition Corp II | Announced -> Sunlight Financial LLC
$ 9.96 | TSIA - TS Innovation Acquisitions Corp | Announced -> Latch, Inc.

Sponsors Aren't Off the Hook
Now, the caveat regarding sponsors. To the degree that they are being more than just naively optimistic with their numbers -- i.e. knowingly putting forward overly aggressive, unachievable financials or hiding red flags such as legal issues or investigations -- then they should be held accountable by the markets, SEC, and any other relevant parties.

The Future of SPACs
SPACs are not dead, but we have a ways to go before the market is functioning well again. The overwhelming sentiment and pressure from so many SPACs awaiting deals and, numerous waiting to price, means that SPACs will likely continue to trade down, many below NAV, for some time. 

Over the next few months we'll see that backlog slowly chipped away until it becomes a size that the investors can once again handle efficiently. We will also see the SPAC structure continue to evolve into an even more investor friendly and less dilutive. And, investors will see a much smaller pool of sponsors that will have amassed a strong track record with good returns all the way post de-SPAC -- it will be a winnowing to quality.

In the near term, expect more of the same. The credit participants are also lurking as yields are getting very attractive and, despite downward pressure, there is still upside potential for all SPACs.

Finally, a last word on potential problems yet to come: be on watch for "peak deal" towards the end of summer when there will be a massive amount of SPACs racing to find a deal before they age too much and are punished even more by investors. If this pushes bad deals with bad valuations to market, then we're all in for an even bumpier SPAC ride.

New Series: Exclusive SPAC Q&A

We're excited to sharing the first of a series of exclusive Q&A interviews profiling SPAC sponsors, teams, and targets. Check out our conversation with Rosemary Ripley, CEO of BWAC on what makes her SPAC so unique in the sustainability space.

See the full Q&A with Rosemary here.

Thursday's SPAC Winners / Losers

It was a rough day again for SPACs with the average pre-deal SPAC dropping to $9.83 and over 75% trading down. SPACs with announced deals didn't escape with over 60% also trading down. There were some bright spots, but not many and no seriously big moves.

Biggest SPAC Gainers
4.53% ~ $ 11.30 | BCTG - BCTG Acquisition Corp. (Announced)
3.69% ~ $ 12.94 | DFHT - Deerfield Healthcare Technology Acquisitions Corp. (Announced)
2.84% ~ $ 13.02 | JWS - Jaws Acquisition Corp (Announced)
2.27% ~ $ 10.57 | CMII - CM Life Sciences II Inc. (Announced)
1.89% ~ $ 10.24 | HSAQ - Health Sciences Acquisitions Corporation 2 (Pre-Deal)
1.65% ~ $ 10.47 | BLSA - BCLS Acquisition Corp. (Pre-Deal)
1.56% ~ $ 13.03 | JIH - Juniper Industrial Holdings, Inc. (Announced)
1.47% ~ $ 11.05 | GHVI - Gores Holdings VI Inc (Announced)
1.42% ~ $ 9.84 | ANAC - Arctos NorthStar Acquisition Corp. (Pre-Deal)
1.38% ~ $ 9.96 | LIII - Leo Holdings III Corp (Pre-Deal)

Biggest SPAC Decliners
-5.61% ~ $ 13.30 | ACTC - ArcLight Clean Transition Corp (Announced)
-5.47% ~ $ 9.86 | WALD - Waldencast Acquisition Corp. (Pre-Deal)
-5.31% ~ $ 9.80 | OHPA - Orion Acquisition Corp. (Pre-Deal)
-3.83% ~ $ 11.06 | AGC - ALTIMETER GROWTH CORP (Announced)
-3.68% ~ $ 25.66 | BRPA - Big Rock Partners Acquisition Corp (Announced)
-3.59% ~ $ 12.10 | FST - FAST ACQ CP (Announced)
-3.25% ~ $ 13.98 | SSPK - Silver Spike Acquisition Corp. (Announced)
-3.09% ~ $ 10.02 | PDAC - Peridot Acquisition Corp (Announced)
-3.09% ~ $ 17.25 | CCIV - Churchill Capital Corp IV (Announced)
-2.92% ~ $ 14.61 | IPOE - Social Capital Hedosophia Holdings Corp V (Announced)
-2.72% ~ $ 12.87 | MUDS - Mudrick Capital Acquisition Corporation II (Announced)
-2.72% ~ $ 10.39 | FTCV - FinTech Acquisition Corp. V (Announced)
-2.53% ~ $ 10.77 | CLII - Climate Change Crisis Real Impact I Acquisition Corp (Announced)
-2.27% ~ $ 10.35 | FWAA - Fifth Wall Acquisition Corp. I (Announced)
-1.96% ~ $ 9.99 | REVH - Revolution Healthcare Acquisition Corp. (Pre-Deal)
-1.93% ~ $ 9.65 | TWNT - Tailwind Two Acquisition Corp. (Pre-Deal)
-1.80% ~ $ 9.82 | PRPC - CC Neuberger Principal Holdings III (Pre-Deal)
-1.48% ~ $ 10.68 | FSRV - FinServ Acquisition Corp (Announced)
-1.32% ~ $ 10.43 | ARYD - ARYA Sciences Acquisition Corp IV (Pre-Deal)
-1.28% ~ $ 10.02 | TCVA - TCV Acquisition Corp. (Pre-Deal)

May's SPAC Mergers Could be Yield Plays

Every SPAC that announced a deal in May, except for one, is now trading below NAV. For those investors looking for yield, these may be attractive as they should close within 4-6 months and will have solid yields and still have upside potential.

May 12 | $ 9.88 | SWBK - Switchback II Corporation --> Bird Rides, Inc.
May 12 | $ 9.86 | CENH - Centricus Acquisition Corp. --> Arqit Limited
May 11 | $ 9.85 | AURC - Aurora Acquisition Corp. --> Better
May 11 | $ 9.88 | SRNG - Soaring Eagle Acquisition Corp. --> Ginkgo
May 10 | $ 9.88 | AUS - Austerlitz Acquisition Corporation I --> Wynn Interactive
May 10 | $ 9.98 | LIVK - LIV Capital Acquisition Corp. --> AgileThought
May 10 | $ 9.87 | STPC - Star Peak Corp II --> Benson Hill, Inc.
May 10 | $ 9.87 | HCIC - Hennessy Capital Investment Corp. V --> Plus
May 07 | $ 10.17 | LSAQ - LIFE SCI ACQ II --> Science 37
May 07 | $ 9.85 | STWO - ACON S2 Acquisition Corp --> ESS TECHNOLOGY
May 07 | $ 9.88 | LOKB - Live Oak Acquisition Corp. II --> Navitas Semiconductor
May 06 | $ 9.92 | AMHC - Amplitude Healthcare Acquisition Corporation --> Jasper Therapeutics
May 03 | $ 9.88 | MAAC - Montes Archimedes Acquisition Corp --> Roivant Sciences

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report.)