SPACs or Special Purpose Acquisition Company are becoming more prevalent
Currently this is not a direct threat to private equity firms… currently.
The Prince states that a Prophet without an army is unable to spread his reign.
It’s my hope that soon the SPAC will become a tool for the Retail investor and worker.
How? and Why?
While on the surface a SPAC is just a publicly traded company that is using it’s ability to be publicly traded to leverage it’s limited initial cash investments in order to acquire a controlling stake in one or more companies.
on the surface they operate like a private equity firm, however when you place your funds into a private equity firm you don’t have agency over where your funds are directed. No dear, that is the responsibility of the firms managers, who will return profits to you after they take their cuts. It’s a good business so long as business is good.
Deeper though members of a SPAC are still individual share holders and therefore they are afforded the rights of shareholders as stipulated by the SPAC, or they can divest their holdings onto the market once they believe the SPAC has lost it’s way.
This means that individuals who make up a SPAC can exert a force multiplier for change.
If you wanted to have enough influence over Walmart to raise the wages and conditions of workers, you would simply need about 20% of the companies shares. (while if you wanted to be King of Walmart you need 51%, but with 20% your voice would be loud and disruptive enough that concessions would be made to appease you)
So you need 20% which as of today is just $72 BILLION, have a look under you couch cushions you may find enough cash to change the world.
But a SPAC could leverage this amount of money
take the example of Churchill Capital V, they are a SPAC that was formed with the intent on purchasing a stake within a single company. They started 2021 out a s $5 billion dollar blank check firm, but when the rumors started to spread that they were looking into an Electric vehicle company, whose stock was valued much higher than their $32 versus their $8. the price of this SPACs stock rallied to a height of $30 and settled at $24ish. Assuming that the $8 share price was a reflection of the cash reserve of the SPAC that means that after the rally they could borrow against their own equity another $10billion. So when Capital V didn’t close the deal again they now had the leverage to look at bigger targets with a $15 Billion dollar budget. And so the rumors spread again they were looking at company X, Y, and Z now the SPAC share price rose as high as $60 or $37 Billion in buying leverage.
So that is how with a SPAC a takeover of Walmart is possible.
I hope by now you’re thinking that by raising workers wages and conditions this will be suicide for the Walmart shares that were purchased with the SPAC, which would then drop the SPAC value.
Honestly I hope you’re correct. Then the puts purchased by the owners of the SPAC pay off covering the value captured by the SPACs stake within the company.
People keep talking about unions like a union is going to solve their problems. Well unless that union is going to use the tools of the Market like a SPAC then just as any organization it exists only to perpetuate itself.
The Revolution will be blood less