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SPACs just broke the annual record for new issuance—in March

March 17, 2021, 1:49 PM UTC

Slow down you crazy child
You’re so ambitious for a juvenile…
Where’s the fire, what’s the hurry about?
You better cool it off before you burn it out

Billy Joel’s song Vienna was a fixture of my youth and provided not bad life advice. The incomparable Ben Platt covered it two years ago on Netflix and got it back in my mental circulation. Today, it feels like the right tune for thinking about SPACs. No, seriously.

Blank check companies, as they used to be called, were also a fixture of my youth—that is, my youth as a reporter covering the IPO market some decades ago. But back then they were frequently fraudulent and excluded from IPO rankings. Congress cracked down on the practice of raising money and going public with no business plan other than the goal of making an acquisition and that was that, for a very long time.

But in kind of the same way that some enterprising lawyers read section 401(k) of the tax code and invented something new for retirement savings, some smart legal minds pored over the Securities and Exchange Commission’s Rule 419, which defined an illegal blank check company, to find a way to make a legal special purpose acquisition corporation, or SPAC.

It never amounted to much until a year or two ago, when a few really big names like Richard Branson’s Virgin Galactic and betting site DraftKings went public using the technique. Its been a SPACtacular rise ever since. After totaling around $10 billion a year from 2017 through 2019, new SPAC listings hit $83.4 billion last year. And for 2021, through March 16, they just reached $83.7 billion, a new all-time record. In a wry and lawyerly comment, David Nussbaum, who helped invent the legal SPAC back in the 1990s, told the Wall Street Journal the other day that “the reputational disadvantage SPACs had is dissipating dramatically.”

Unfortunately, as we’ve been cataloging here, the SPAC boom now looks like an out-of-control bubble of speculation, particularly if you focus on EV companies like Nikola and Lordstown that have been hit by allegations of misleading investors. Three exchange-traded funds just own SPACs. Now another is debuting that will only short SPACs. Interest is also brewing in Congress to curb one of the big advantages in using a SPAC: the ability offer heady forecasts of future growth, forecasts that can seem worth little more than the napkins on which they were first dreamed up. (In a traditional IPO, companies have to stick to the historical financials, verified by an outside auditor, thank you very much.)

These kind of things never end well. I fear the SPACpocalypse is near. Like the song goes, “You can get what you want or you can just get old, you’re gonna kick off before you even get halfway through.”


In naming some of the top makers of electric pickup trucks on Monday, some of you pointed out that I left out some companies with very cool concepts. In fact it was seeing a video of Canoo’s bubbly shaped pickup that sparked the idea for the essay. But Canoo, Alpha, and some others are aiming to deliver trucks in 2023 and beyond, so not good candidates for including on a list betting on who will be first to market in 2021.

Aaron Pressman
@ampressman
aaron.pressman@fortune.com

NEWSWORTHY

Hit me, kick me, you can never get me. The teenager who cracked the Twitter accounts of the rich and famous to get a little more rich himself is going to prison. Graham Ivan Clark pled guilty on Tuesday and agreed to serve a sentence of three years. Under the plea deal, Clark was sentenced as a "youthful offender," avoiding a 10-year sentence that applies to adults who committed his crimes. In other legal news, conceding to the reality of losing in court, Uber agreed on Tuesday to classify its 70,000 U.K. drivers as company workers. That means the drivers get minimum wage protection and some other benefits.

Nice little app you got here, be a shame if anything happened to it. Speaking of conceding to reality, Google announced it would lower its cut of app sales to 15% on the first $1 million of revenue for every developer, large or small. That's more straightforward than Apple's bizarrely complex policy of making developers apply to qualify for the lower 15% cut if their sales were under $1 million the previous year. Google would have lost $587 million, or 5% of its app store revenue, if the policy had been in place last year, research firm Sensor Tower estimates. Apple's policy has a cost of $595 million, or almost 3% of its app store sales. The cuts aren't helping deflect antitrust pressure just yet. The states led by Texas suing Google expanded their case on Tuesday, adding the search giant's recent effort to eliminate tracking cookies.

No silicon in the cupboard. The chip shortage is very real and even the leading manufacturers don't have enough for themselves. Samsung says it may skip offering an updated Galaxy Note phone this year amid a "serious imbalance" in chip supplies. The company is expected to offer a new phone of some kind at an event later today. Meanwhile Intel debuted its 11th generation desktop processors but, due to its manufacturing difficulties, they are built on the 14-nanometer technology that was introduced six years ago. And they say Moore's Law isn't dead. Kind of a Weekend at Bernie's situation then? That may not be a fair conclusion when AMD this week introduced a new version of its Epyc processor for servers built on a 7-nanometer process.

Nada coin. In crypto world, the NFT flames burn hotter: Elon Musk decided to sell a non-fungible token linked to one of his tweets. But after bidding appeared to have stalled out at $1.1 million this morning, Musk revoked the offer. At the other end of the spectrum, famed Columbia economist Jeffrey Sachs is not a fan of cryptocurrency. In case there was any ambiguity, he cleared it up: "I am not a fan at all of Bitcoin," adding he considers bitcoin an "unbelievable waste of resources and a highly polluting waste of power, a lot of CO2 emissions resulting from nothing of social value."

To sleep, perchance to trace. Want to track your sleep without having to wear a smartwatch to bed? Google claims its new smart screen, the Nest Hub, can tell how long you've been snoozing via radar. I hope it's also on the look out for UFOs, falling debris, and flying monkeys—that would be a real service.

FOOD FOR THOUGHT

We haven't seen Adam Neumann, the deposed CEO and co-founder of WeWork, in the news much lately, which is a shame for fans of ultra-crazy management hijinks. But a new documentary is coming out this week called WeWork: Or the Making and Breaking of a $47 Billion Unicorn that should satisfy our cravings. Fortune's Martine Paris interviewed director Jed Rothstein and asked what surprised him most in the making of the film.

I was surprised by the emotionally charged and complicated journey that former employees had with the “We” and the “Me” of Adam Neumann. He was a charismatic leader that many followed and in the end felt deeply betrayed by. At the same time, many shared a sense of fulfillment for having strived for the dream.

IN CASE YOU MISSED IT

Twitter chairman’s venture capital firm Inovia looks to investments in Europe By Siva Sithraputhran

The daring architecture of Elon Musk’s compensation plan has the Tesla CEO on track to make history By Shawn Tully

The r/WallStreetBets crowd has a new target: Saving gorillas By Chris Morris

Will stimulus checks take Bitcoin even higher? One analyst thinks so By Lance Lambert

Cyber firm Recorded Future buys ‘dark web’ infiltrator for $52 million By Robert Hackett

To fix the cybersecurity talent shortage, we need smarter product design By Abhishek Agrawal

France refuses to block Apple’s big privacy changes By David Meyer

(Some of these stories require a subscription to access. Thank you for supporting our journalism.)

BEFORE YOU GO

The Perseverance rover has been on Mars for about a month now, but hasn't moved around much yet. The date of the first drone helicopter take off on another planet is also still TBD. But Nature has a rundown of all the interesting science stuff the rover has been doing in the meanwhile. It's midweek and the red planet is high overhead. Stay inspired.