As for the sniff test - while I agree with your assessment, I wonder if the aspect of providing employees easier liquidity will make them more attractive than traditional VC deals? Essentially by "investing" in companies with a mix of SPAC stock and capital, making the SPAC stock available to employees to sell in order to liquidate some of their options / equity. Essentially giving them better access to deals than others (a variation of test 1)
As for test 2 - I think this is true of many tech startups outside of the valley, maybe they will look outside the echo chamber.
As far as Chamath's Hedosophia, not sure I'd bet against him just yet. He's got a pretty good track record of winning ;)
Uh, how would we know that if they’re undiscovered?
No, seriously - back up 20 years and tell that to the people who invested in Google/FB/Amazon. Or back up 10 years and Tell that to the folks who were going to invest in mobile gaming startups. Or how about 5 years ago - tell the folks who were starting Uber and Lyft that their markets don’t exists.
GDP seems like a terrible way to measure the economy. Let's smash all of Bastiat's windows and grow the GDP!
1) An endless oversupply due to the US oil boom. Even the OPEC cuts + Russia restraint + Saudi cuts to the US market + OPEC cut extension + modest demand growth have not been enough to inflate prices. There's vast supply perpetually waiting on the sidelines, between Russia + the US + OPEC, there's no scenario where $100 oil returns anytime soon.
2) The strong dollar. Commodities are largely priced in dollars globally. If the dollar goes up, oil goes down. Oil tanked exactly in line with the greatest dollar bull run in decades. July 1st 2014, the dollar index was at 80, eight months later it was at 100 - a massive move by the dollar. Over that time oil got cut in half.
ISIS is entirely meaningless in this context.
https://www.bloomberg.com/news/articles/2017-02-20/saudi-ara...
Why do you think that is? The only reason why they flooded the oil markets with oil is because they wanted a low oil price. And the very simple explanation for this is because they wanted to starve ISIS from all their extra money they were receiving from black market oil.
They eased off a bit because they've achieved their goal to maintain rock bottom prices, but they're still producing > 10M barrels a day.
There's an oil glut because Saudi Arabia and the US want an oil glut. There's no sane reason why Saudi Arabia increased production to historic levels in the face of $40/barrel oil prices except for the fact that they want a low oil price.
- they were trying to starve out oil sands and other alternative oil sources to ensure they don't continue to come online in the near term, this has had some success as anyone in Calgary or Edmonton will tell you.
This is far and away the biggest threat to Saudia Arabia's oil business and probalby the first thing you should look into.
- they need money, they essentially buy peace in their own country by showering it with money. As oil prices fall due to more oil being available, they have to sell even more to make their budgets balance. Russia is also doing the same.
I'm sure ISIS is in their minds but its much more of a happy conincidence.
I mean oil isn't bitcoin, you can't just send it over the internet. ISIS was selling to Syria, If you want to stop ISIS from selling oil to Syria, then wouldn't you just ask Syria to cut it out and if they didn't listen then wouldn't you start bombing them..... hmm sounds familiar
Always look for the simplest answer first, just shouting ISIS doesn't make a whole lot of sense when you consider how much the depressed price of oil has hurt Saudia Arabia int he past few years.
The oil sands have been in business for the last 40 years. You're telling me now is when they feel the Canadian oil sands are a threat? In the last 2 years is when they decide to act irrationally and start dumping oil? Hogwash.
ISIS controlled large portions of Syria's oil output. But their operations in Iraq are much larger.
https://www.forbes.com/sites/timdaiss/2016/08/26/why-islamic...
Also from the article: ISIS used to earn some $30 million monthly from its oil operations, but revenues were down to around $15 million a month at the beginning of the year, according to Christopher Garver, spokesman for Operation Tidal Wave.
ISIS's claim to be a caliphate hinges on their ability to maintain a government-like status. They can continue doing this if they make $30M/month. But the US is hamstrung because they want to stop ISIS from taking advantage of the oil in Northern Iraq, but they can't bomb all the fields, otherwise it will cripple Iraq going forward.
So the best way to hurt ISIS and the Caliphate is by hitting their major source of income, which is oil, but cutting the price. If legit oil is $40/barrel instead of $100, and the caliphate can't afford to maintain their structure, then it implicitly collapse. Did you notice that after Hurricane Harvey, the US used that as an excuse to dump oil from the SPR? The problem isn't oil, it's the refineries in Houston that were taken offline. Releasing oil from the SPR made no sense because we're already in a glut, except to keep pressure on oil to stay low.
Again, I don't know why this is so hard for some people to believe. It's not a conspiracy theory, it makes a lot of sense, and I support it.
When the Saudi's tanked the price of oil, I assumed it was engineered by the USA to kick Russia's economy in the nuts in retaliation for their actions in Ukraine, Syria.
I think you should qualify that with "good" tech companies (eg good team, good market, good product, good growth) ... crappy companies have plenty of trouble raising money.
http://www.investopedia.com/terms/s/spac.asp
Essentially people collect money upfront and then go deal hunting, after a period of time, usually 2years or less, they then go back to the people who put their money in the deal and give them the choice of pulling their money out and taking a nominal interest rate gain, or putting their money into the deal and collecting warrants along with the deal as a sweetener.
This is very common in the minerals and mining space where serial entrepreneurs found an oil company, go drilling and then sell the company once its got a well up to a big producer. It's a way for these deal makers who know everyone in their industry to help smaller companies get liquidity, while of course helping themselves and the unit holders to make money.
They benefit the unit holders because its a place for them to park alot of money risk free with a decent call option on the upside.
Asa hedge fund in today's market the problem is often too much capital and too few places to invest it. SPACS offer a way to park say $100 million in a vehicle that has alot of upside with not alto of downside. It has a very similar payoff to Venture Capital in that most SPAC's end up not working out but the few that do make it worth while.
As a side note, if you ever work for a hedge fund or any investment company, you'll get the idea of asymmetric risk drilled into your head. Meaning you want your deals to have the potential for 10x upside with say 1x downside.
The key to running a successful SPAC is almost always:
- who is running it, do they have deep industry connections and the ability to get deals that no one else can
- the company being acquired needs to be in need of capital and not in a position to raise it. or put another way, it needs to be win/win for both investors and the company owners.
This particular SPAC seems to solve neither of these needs as typically silicon valley tech companies have no problems raising money nor do they have any issues going public, so this SPAC fails the second test.
It also seems to fail the first test as I can't see why the founders are in any better position to be deal rain makers than say Sequoia, KPCB, or A16Z.