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Wall Street: SPACs Gone Bad

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Hola, Aaron Weinman here. Let’s talk about SPACs.


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SPACs and hedge funds 4x3



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1. SPACs are sputtering. More than 10% of companies that merged with SPACs in 2020 and 2021 reckon they’ll go bust. Nineteen firms have canceled


SPAC

mergers this year.

Investors are more discerning over where they park their cash, and regulators are sharpening their pencils on how SPAC targets go public, leading banks to spurn them.

Take the SoftBank-banked mortgage lender Better.com. It’s laid off so many thousands of staff in the last five months, you’d be forgiven for thinking you were watching Ari Gold of “Entourage” fame.

Now, Sarah Pierce, Better’s former executive VP for sales and operations, alleged in a lawsuit that Better deceived investors to keep them onboard a merger with Aurora Acquisition, a SPAC sponsored by Novator Capital. (Better said the claims are without merit.) 

SeatGeek is another casualty of the downturn. Seatgeek and RedBall, a SPAC led by former Goldman Sachs partner Gerry Cardinale and “Moneyball’s” Billy Beane, “mutually agreed” to kill a merger last week due to market conditions. But people on the inside said neither were willing to compromise on a revised company valuation or amend the “sponsor promote.”

The “promote” is a lucrative fee for the SPAC sponsor after it seals a merger. Sponsors are reluctant to reduce what they earn on their “promotes,” which usually amounts to a fifth of a SPAC’s stock, one person said.

With SPACs on the fritz, bankers are fine-tuning their résumés.

“Layoffs are coming,” one banker told Insider. “Pipelines are down. Companies are pushing plans out to 2023.”

Here’s the latest on Better’s lawsuit. 

And for more on SPACs gone awry, check out this dive into the SPAC era’s worst-ever deal.


In other news:

Man wearing stuff holding onto cliff edge

Junior bankers are hanging on to the power they seized last year — but an economic slowdown threatens to return control to their bosses.

DNY59/Getty Images


2. Wall Street’s minions are losing power. Since the pandemic hit and bankers retreated home, the junior staff were showered with raises and perks like Pelotons. But the slowdown in dealmaking could reverse some of the juniors’ hard-fought victories. Here’s how the recent decline has observers spooked.

3. State Street is planning a takeover of Credit Suisse, as first reported by Inside Paradeplatz. The Swiss bank’s shares jumped after the report, a reversal of fortunes after warnings of a second-quarter loss. State Street declined to comment on the report, but some analysts say the deal is “highly unlikely.” 

4. Cashed-up Coatue has got a wish list of stocks. Here’s 13 tech names the hedge fund thinks have fallen victim to indiscriminate selling.

5. Goldman Sachs’ tech execs are all about the “polycloud” approach. The bank’s co-CIOs detailed Goldman’s cloud strategy and compared being “cloud agnostic” to the Flat Earth theory.

6. Staying on Goldman, the Wall Street bank lost a chief saleswomen in its asset-management arm, according to Bloomberg. Heather Miner, who earned a partner title in 2018, is joining private-equity shop Advent International.

7. The UK’s Zopa is bustling into the BNPL space. After teasing out a potential IPO, the neobank’s CEO also affirmed that it’s waiting for “the right moment” to go public.

8. JPMorgan’s growth-equity arm invested in Codat’s $100 million Series C round. The company constructs tech that connects fintechs with banks. Here’s an overview of JPMorgan’s key fintech deals.

9. Decimal, an accounting fintech, raised $9 million in a seed round. Chief Executive Matt Tait told Insider that there’s ample opportunity in “the boring stuff,” when it comes to running a business. Check out the 13-page pitch deck Decimal used to snare its latest funding.

10. Coinbase pulled back a number of job offers. Here’s an essay from Ashutosh Ukey, a 23-year-old software engineer, who spoke to Insider after having his offer from the crypto exchange withdrawn.


Done deals:

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Curated by Aaron Weinman in New York. Tips? Email aweinman@insider.com or tweet @aaronw11. Edited by Hallam Bullock (tweet @hallam_bullock) in London.

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