So yesterday I get a "Lightning Round" call about a SPAC, and it's one of those SPACs that's brought public by an outfit that has already issued a SPAC. I didn't want to confuse SPAC one and SPAC two, by the same issuer, and said so out loud. But I did know them both, had actually done homework on both and was prepared to opine on either.
Before I did, however, I said that there are too many special purpose acquisition companies, and that it's hard to keep track of them. How can you not feel that way after 294 have been issued this year, many with similar names and similar missions. It's gotten preposterous, with celebrity named SPACs, and athlete SPACs and even the equivalent of bucket shop SPACs, according to Starwood Capital Group CEO Barry Sternlicht, one of the nation's great investors, who knows a lot about SPACs, himself having issued a bunch of them.
"Several of the companies have already been investigated by the SEC because of false statements," Sternlicht told Squawk Box this morning.
Now, you might say, wait a second, Sternlicht's done a bunch of SPACs why should he catch a break. The answer? Because there are good SPACs and not-so-good SPACs and good operators and not-so-good operators, and Sternlicht's one of the good guys. He's careful and considerate and thoughtful and rigorous. You know he came on the show when the stock was about $19 and told a great story and then when the pandemic struck, it was almost cut in half. I went back to him and he said that things were sound and he exuded confidence, telling me that while others in the real estate business were hurting, his partnership wasn't. Sure enough, the stock's at $24 and you've gotten a fabulous distribution the whole way, as, even at these levels, it still yield's 7.8%.
So, Barry's money's good, and I am always going to be interested in anything he's doing, SPAC or otherwise.
But it's pretty clear that we are now in the outer limits of spacing, my morning partner, David Faber said -- today, we are now in "SPAC-out." And I am emphatically agreeing with him. Worse, we've got a Gresham's law thing going, where bad SPACs are driving out the good. Selectivity's now key and most don't pass the smell test any longer.
Nevertheless, when I woke up Wednesday, I was struck by the vitriol I received in Twitter (TWTR) for making a joke about how it's so hard to tell one SPAC from another and if I did my homework I would be a lot better at my job.
These comments got me all steamed, because I do a monster amount of homework. That wasn't the point at all. OK, am I as good as I was in 1984, when I held a group of more than 100 people rapt as they called out stock names and I gave them exact closing prices for that day? Maybe not. But, more important, unlike the hecklers this morning, who wanted mathematical or scientific proof that we have entered some sort of frothy cauldron of SPACs, all I can say is I have been doing this for 40 years, and I know what a rogue's carnival we've now got going.
Is this all part of some incredible market undoing, the beginning of the end of the new investor's thrust in to the market, intertwined with the sunsetting of GameStop (GME) ?
Nah. It's just a recognition that the SPAC saturation is here and if you haven't done one yet, all I can say is you are definitively late to the party, so here's your hat, what's your hurry and don't let the door slam you on the way out.
