YouSaid · the spoken record

Louis Camhi

lines on the record: 160
first: 2023-06-19
most recent: 2023-06-19
sittings or episodes: 1
sources: podcast

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“It's even less than that, but it's up about 2%. But 2% in my world in a one-month period, the SPAC arbitrage or arbitrage world in general is all about annualized yields, right? Percent in a month, if you even forget about compounding for a second, is 24% in a year. So, if I could find an investment that made me 24% in a year on an annualized terms with no risk, right, because it goes back to you're buying it below trust and everything.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“So again, when you think about these things as bonds or yield instruments before investors were pricing the saying like, okay, I want, I think this should be priced at a 5% yield to maturity, and I'm assuming that the trust account is static. And so that implies was trading at, it looks like the low 990s. And all of a sudden, you find this fact, and then the next morning, my first order was to try to buy this. And I even had people ask me, like, why are you buying this? This is a bad buy. I'm sitting there. I'm like, buying it because unless the sponsor made a mistake or lied, everything has changed now.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“You really have to be in the weeds. I'll give you an example when. Running season for SPACs is when all of the quarterly or annual statements come out, right? The 10Qs, the 10Ks. And I flip through all of them and I sit down at my desk for hours with a glass of wine after I put my kids to bed. It's kind of a lonely job, but I also feel like it's necessary. And you find something like there's this back called BWC, Blue Whale Acquisition. Blue Whale acquisition, for whatever reason, kept all of their trust proceeds in actual cash, so earned no interest. And all of a sudden, in their 10Q, there was one line in there that said, as of 331, we moved all of our cash into an interest-bearing account.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Definitely. As folks can tell, this is not only complicated, but it takes a lot of work to work through different permutations and to be right. And it makes sense that it's a full-time job. If you're paying someone to manage your money and they're like, oh, I'm long Apple instead of Microsoft. Like that's not that hard. But this is pretty hard.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“And so they have a provision that says if the stock trades above 10 for 20 days in a 30-day period, we can force a cashless exercise for something like 0.25 shares of, I forget the exact ratio of stock. Now, the warrants are trading at 55 cents. And so if you force that exchange and kind of value them on paper at 250, people would be pretty happy. So that's a instance of a positive outcome. But again, you need to actually flip through the warrant documents to know this exists.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“So, like, if you look at, and I only mentioned this one because I tweeted about it recently, there's a DSP called LiveWire, which was a spin out of Harley Davidson. It's their electric bike division.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, if you want to oversimplify, if you're thinking about buying the warrant before you buy it, call your broker and ask them if I could, do I buy this today? Can I exercise it today and see what they say? You may not even get a straight answer. And candidly, if you think time is of the essence and you can't get a straight answer, you may not want to put on the trade anyway because things can just change that quickly. But some of the warrants, they actually have the right, they can be forced called at a lower price but into equity. You know, if you look at.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, there we go. $6.50. But the worth trading at $3. So he said, Oh my God, this is a steal. But here's the thing. It's only exercisable up until it's only exercisable starting on a date. If it's not exercisable, you're actually sure to put option up until the date becomes exercisable because it could go from $18 to $10. You're screwed.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Right, and I just want to say a point let's say the stock is trading at $18 and again, the cap is normally at $18, the warrant has a strike price of $11.50, right, but not the obligation to buy at $11.50. So that the intrinsic value of that would be $5.50, right?”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“I don't know if it's not legal per se, but maybe it's not ethical or not right that the sponsor warrants are treated different than the public warrants. But that'll be something for the lawyers to deal with. I think what's really important, though, for SPACs in general is you just have to read. You have to kind of take the time to read. And I know that's discouraging. Maybe if you're buying $1,000 worth to say, is it worth spending all this time reading? There's just a lot of nuance here that matters. If you catch it, you can make some money off of it. And more importantly, maybe you can save yourself the money.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“And it's funny, I tweeted kind of about Getty when that whole thing was going on and me because I didn't short a single warrant. But I post it more as a buyer beware notice. And it played out exactly as I thought. And what was strange about Getty and the dynamic here, and I think this is the base of the lawsuit, is the sponsor took their warrants and converted them into equity before all this happened. And so, you know, I guess there's an argument that it's not a point.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“But I think the guy's warrants are still in place. I think Pagua's warrants are still in place. But what's really interesting to me about these conceptually is if the fiduciary duty is only to the equity holders, then kind of canceling out your warrants and taking out no dilution is a positive. But if you have any fiduciary duty, and this is a lawyer question, not for me, but if you have any fiduciary duty to the warrant holders, now there's some real questions.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, and there were two spacks that really took advantage of that. They deliberately or coincidentally waited long enough for their warrants to be redeemable or force redeemable. And they registered the warrants on the pipe at the same time. And that selling pressure from the pipe took the stock back down below 1150 and all of the warrants for those two SPACs expired worthless. One of them, I think, is in a lawsuit right now.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“The Warren Strike crisis that you mentioned is usually $11.50. So if the stock is below $1150, you're not going to want to exercise it anyway. Most of them have a provision where if it's above $180.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“There's definitely information asymmetry, but generally speaking, for a deal, so the deal has to close, that's part one, and then the wars need to be registered usually in an S1 filing.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Right, and warrants are only exercisable on a certain date, and amateurs such as, let's just say, like myself, can be confused upon when it can actually be exercised. Something could say it's, oh, it's exercisable starting on August 15th, but it's only exercisable given conditions A, B, C, D, D, E, FG. And then you call the broker and they're like, I just work here. I don't know what the hell you're talking about.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Candidly, the rights got so cheap. It's like, well, why am I going to sell these at five cents? And so it cuts both ways. But it's the reason why for me, and there's some strategies to take on more risk, but I like to keep the warrants and rights to be just a much smaller part of the portfolio so that, one, the volatility isn't overly distract me personally. And two, I don't want to sit there and tell an investor that we made or lost a lot of money because of kind of this riskier asset class when my strategy is more predicated on the steady eddy arbitrage returns of SPACs.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Right, and this is a real interesting scenario because this deal is kind of in limbo. They held their, they had two votes at the same time last week, one to extend to give them more time and the other for the deal. Both passed. So if you believe that with the stock trading at 624, that represents fair value, then these rights should go to 62 cents. If you think for some reason the deal is not going to close, the comma is going back to, I think, this 1056 in trust. They just contribute four cents or 1060 in trust, and those rights are going to zero. So this case, you know, I did a good job of kind of shooting myself in the foot by bringing up something a little more complex. But it just goes to show you there is opportunity to make money kind of in the warranted rights, but the volatility is just a lot harder. And the reason, going back to your point full circle, the reason I own these rights was because I had bought the units and the IPO and just...”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“And there's deals out there where there's an interesting deal and EBITDOTable and if it closes, then there's a lot of upside to the warrants or rights. So I'll give you an example. We spoke about, or I mentioned the SPAC ROC Energy, the ticker is ROC And it's funny because I actually before they even announced a deal or whatnot, I mentioned it on the last podcast 10 months ago. And you saw these rights go from five cents to 35 cents. And now the funny thing, though, or shouldn't the funny thing, but the observation is they went to 35 cents on their deal announcement, which was in February, and they're at 35 cents today. So you have to be pretty tactical because you may have said, okay, these rights convert into one-tenth of a share, so 10 rights, one share. So 35 cents means it's pricing the shares at 350. Now the shares right now”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Right, but if you look at some of the recent deals that have closed, so let's look at the last. Have a recency bias. If you look at the last 40 deals to have closed, the average warrant is trading at 50 cents. So, you know, to be overly simplistic, if we assume that Does a 50% probability of a stack closing a deal? So now if I buy you at 25 cents and there's a 50% chance if you go in a 50, that's breakeven. And so I need to buy quality warrants at below 25 cents. And then I have to account for kind of the volatility and lack of predictability relative to the core strategy. And so it just becomes harder. Now, could there be a special situation that may”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, well, you know, it's price dependent, right? Again, if you meet the criteria of you're a tier one sponsor, my book, because you have a history of proprietary deal fund capital, and if your warrants are cheap, then sure, maybe that's worth a flyer, but if your warrant get expensive, you know, that's harder. When you look at, so for me, I look at a lot of the current trading statistics. Look at the average warrant for a deal that's closed, it's something like 20 cents. And so, in deep perspective, that number was a few dollars years ago. And so if I'm buying the average warrant at 10 cents and I think there's a 50% probability of them doing a deal, it's not that would be break-even.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Very little on the warrant side. In fact, this month, or maybe last month, I made my first warrant purchase in I want to spend almost a year and keeping those positions really small and have to be super asymmetric. And kind of one of those situations where I'll be happy to kick myself for not buying more if it works out.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“The flip side is for guys like me that run fun with a little bit of margin, your cost of margin is also quite a bit higher now too. The other thing is, and we spoke about it last time about writing options, the option market for SPACs has been dead for quite some time. There's just not a lot of volatility. So for options to be interesting to market participants, you need to have price moves. You need to have that occasional $10 stock that jumps to $13 or whatnot. So we have not been active too much with options. With warrant, you know, it's funny. I think back to April of 2022 and I was looking at the warrants thinking, warrants have gotten back to the levels where I was buying them in 2015 and 2016 and you could pencil out really nice returns because they were priced at 40 cents and not, you know, $2 as they were in 2020. And so, you know, the fund dabbled a little bit there. And for those of you who've been tracking the warrant market, SPAC warrants were down like 95% last year. The market didn't care. And you saw tier one sponsors liquidate.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Right, and so when you look at something like, again, we're picking on Aries, and I think Aries is a great sponsor, but when you look at something like in Aries, you'll say, okay, they have two years to do a deal. If I pencil forward at 5%, that means at the end of two years, they're going to actually have 111 in trust, right? And so I can go out there right now and buy this thing and know that, you know, if this thing liquidates in two years, I make 5%. And that's really not the worst outcome in the world. And so if you can participate in some of these IPOs. And so, you know, that's today with, you know, there's sometimes I quota with the common trading at 1014. You know, if you were able to buy the units at $10 at the IPO, which we all know it's hard to get IPO allocations, but the yields were that much higher and you got that warrant optionality. So that's a really big difference between now and then that you have this kind of interest rate kicker.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Trust number isn't static. When I mention that Ares launched their IPO and they came out with 1010 trust, that 1010 and trust now gets invested in a money market fund, which is earning called 5% based on today.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“No, that's totally right. I mean, look, for me, in a perfect world, I don't want to be redeeming. I want to be selling before at a premium to trust because, again, that's just good for this back ecosystem. When someone redeems, if they think that's the right choice for them, that's fine and you're protecting your capital, but you're also, you know, that's $10 per share that's not going to the target. And when you let's not think about it on a back-by-spack basis, but when you think about spec as the product, if spac don't deliver any capital to the target, they kind of defeat their purpose. So for me, in a perfect world, I'm buying something that has, I'm buying something at 10 with 1050 in trust and a deal is announced and I can sell it at 1075 because the fundamental guy comes in and says, this is a good asset. I want to own it. And then just to clarify a couple things, because this is where the world has changed quite a bit since we last spoke 10 months ago.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Well, you're good at saying it the nice way. So, most of what you invest in is SPAC arbitrage, treating SPACs as bonds, and then redeeming them, maybe doing some warrant stuff and then maybe selling some call spreads against them or doing stuff like that. But you're not just to get the audience clear, you are not buying this home builder or this copper and then owning the actual stock after DSPACs, right? That is not your investment strategy.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“So it's just nice to see that, wait a second, if you bring a company that has a real business with real profitability and a growth path and a real manager team, it can still be decently received. And we'll see if that's the case. We saw earlier this week we saw a metals deal for a copper mine and we saw a power deal close. And those are trading okay and they were able to raise real money. There's clearly still opportunity. It's just we're the pendulum's moving slower than I would prefer. Maybe that's the nice way to say it.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Options are limited on the private side, and VC markets will be challenged. So they're almost being forced to evaluate this. So I would say that I don't want to say that they're lower quality opportunities per se, but the companies that I would like to see that are easier to value, that are more tangible, they're still the minority of deals, but growing in proportion. And look, there's been a couple of them that came out. They've been pretty well received. United Homes Group is a home builder. real company, real EBITDA raised a real pipe. I'm just checking right now the stock's trading at $11.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“The deal quality, it's really all over the place. We've seen a couple that are more, let's call it like energy and oilfield services that are real businesses with real cash flow. But ironically, when we were talking a few months back, energy was really hot. Now we've seen energy cool off at least The time being. And so we'll see how those deals are received. Still, your handful of biotechs. And, you know, look, I'm not a biotech guy. I can't really tell you much about the market, but it just feels like for some of those companies, they're...”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“The valuations are a little more reasonable. So let's touch on disclosure for a second. The SEC came out and basically said we are going to get change the rules for SPACs. Now, the rules were due in April, and here we are in June with no rules. And so one of the debate points was on disclosing projections, which I think we spoke about in the past. And there's this weird dynamic where in an IPO you are not allowed to disclose projections in your documents, but in a merger you are. And so since aCAC is considered a merger, you were able to give projections and people, we talked about these forecasts and these 20, 30 projections, et cetera. So now you're getting a lot less. And so maybe you'll get, you know, the 2023 number, or you'll usually get by now the 2022 number. So when we think about valuation, it's harder to look more forward looking. In terms of the sponge,”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“81 deal announcements completions announcements deals this date and so some of those are perhaps SPAC sponsors incentivized that because they have to find a deal otherwise they don't get paid so what is the general quality of the deals that are being done if you know I'll make the rough characterization that in 2021 you had either you know bad companies being valued at rich prices or mediocre to good companies being valued at ridiculously expensive prices what are the quality of companies that are being you know quality of deals as well as their valuations”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Shit hits the fan, you know, they're nowhere to be seen. And so I think that's been the frustrating part that a lot of sponsors think that they were conned into this product. And that this wasn't my core competency, but XYZ Banks said like, no, you can do great here. Know trying to bank disappears, and now you're like, well, I don't want to lose my risk capital. So, what do I do? Unfortunately, you're right that the incentives are to do any deal versus no deal, but to some extent, you know, you've kind of walked these guys off the plank and now that they are only opportunities to jump.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Sure, well, you know, it really depends on how far back in the timeline you want to go, right? Is it a sponsor saw other sponsors getting rich and just said, I want to do this too? Is it a banker tapped you on the shoulder and said, hey, I got your information from a friend of a friend, you should raise us back. You either have the risk capital or access to it, and we have an investment banking division and we have a capital markets division and we will make sure you get this done. There are a handful of banks out there that almost promise sponsors like you won't have to liquidate. We'll find you something that will help you finance it. And then, you know, when my let's say when shit hits the fan, but”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think that perception is a problem because you said it in a very polite and generous way of a lot of SPAC sponsors didn't have the tools to do a good deal. Flipside of the coin, the rude way to say that is they were incentivized to do a deal because they got paid if they got a deal done. They didn't get paid if they didn't do a deal done. So they bought a crappy company. And now the stock's at 50 cents.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“You read the letter, but starting to hear from more capital markets bankers that I don't want to say the floodgates are opening, but there's more of a willingness. And I think when this Aries deal came and it priced tighter. So again, tighter meaning more friendly to the sponsor than to investors, investors realize that, or sponsors and bankers realize like we may have a window here where we can come out with more spacks. And my hope is that we continue to see only the what the guys I call tier one bringing paper because we have a perception issue. We have a lot of or we had, I should say, a lot of SPAC sponsors that didn't have the tools to completing a successful DSPAC. And if we can kind of keep the sponsored universe more limited to guys that can get good deals done, I think the perception of quality will improve over time. Unfortunately, not a short-term solution, but nevertheless, I think it's pretty important.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Well, all the deals themselves are pretty bespoke, but what's interesting to me is when you look at year to date, there have been 81 SPAC announcements, deal announcements. So the notion that SPAC deals are dead, the data points to the opposite. Now, some of these deals are still, you know, we're not kind of seeing all the deals that I'd like to see. And again, not to be overly redundant, but you just want to see deals of companies that you think can stand on their own two feet in a challenging capital markets environment that you don't need to come out and raise capital within the next 12 months, et cetera. So we are seeing some of those still not as many as I'd like. But there are still targets that are willing to engage with SPACs. The IPO market has been a lot slower. So we've seen 15 IPOs year to date, most of them a little smaller.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“It and so we've got when you have a spec, there's announcing a deal, there's completing a deal, and then there's terminations, liquidating the deal. Many deals are getting done now, and what are the terms that there be done with?”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“And so you were able to a few weeks later actually yesterday those units were splitable. And so if you participate or if you owned any of those units, you were now able to sell the warrants or sell the common, any kind of permutation and combination. And so what was really interesting about that deal is all of a sudden now some of the deals that we've seen earlier this year were $50 million and $70 million. the paper was fine, but this is really the first time we're facing all of these liquidations. There was an opportunity for people to put a lot of money to work. And the deal priced a little tighter than I would have expected. But again, I just think that shows you the market's demand for paper.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Well, kind of. So let's talk about specific deal that just priced because I think it was an interesting Aries just priced in IPO a couple weeks ago. And it was interesting because Aries is obviously a really high profile, high-quality sponsor. They decided that they still like the SPAC vehicle. They raised $500 million to an IPO. In that IPO, In that IPO, you were buying a unit and each unit represented one share of stock and one half of one warrant.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, well, I mean, look, any warrant is dilutive, but with an 1150 strike price, if in theory you're doing a deal at 10, you're creating a path to raise money”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“I mean, we launched, I would call it, just after the bubble burst. I mean, to put it in perspective, I think this is kind of a funny fact. We launched the day after DWAC, which is the Trump SPAC deal happened because all of my investors who I rarely hear from them, but they all called me that day to say, are we in this thing? Because it went from $10 to $110. So we were kind of already beyond that. But everything what you said is correct. Like most backs, nowadays they'll come out with between 10, 10, and 1020 in trust. They'll have something like 18 months, anywhere between 12 and 18 months of duration. And so, you know, when you're buying those units, which in the IPO, they sell units, which are the shares plus some warrants. You can play that yield game. You can hold the warrants. You can sell the warrants when they start trading separately.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Rates back in the good old bubble days, not good old, but a lot of people were asking for the shares, and you were in the minority of asking for your money back. But now, I mean, you saw some of the redemption rates, like 95% of people want their money back. That's a problem.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“You're saying some companies, if they were able to secure capital, they could invest in their business model and maybe grow and survive. I would say some companies, if the business model is not there, it wouldn't have made a difference. I mean, Starry's business model was giving people internet for free. And they had totally addressful market in the investor deck, which is for me is always a red flag. Okay, but Louis, I got to define a few terms for the audience, as well as just for myself. Trust is kind of the amount of money that's in the bank, how much gold is in the vault. So if it's trading for $10, but they have $10.50 in trust, let's just say, and you have to vote for the deal in a year. So you have the option to redeem your thing for cash. So $10 to get $10.50 on a one-year basis, that's a 5% yield, and that's something that you frequently do at your fund. But, or you could actually say, oh, no, I want shares in a new company, which will have a, you know, a new ticker. But redemption.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Same issue. And so if we can start seeing The last time we talked about energy, it's interesting because there's a couple of energy type assets that are in the DSPAP process now. And I think as we get more companies like that, there's ROC is one of them that's out there with an oil field services type company. They haven't closed yet. I think there's a lot of concern. They're below their min cash. But in this case, they're EBITDO generative, right? And so even if you waive the min cash like, okay, maybe they can't pursue M&A or some other investment as quickly as they want to, but it is a self-sustaining entity that has the right capital, the right balance sheet. And I think there's a lot of companies out there that just don't have the right balance sheet.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“That was a tough one for me because there was a nuance in those warrants where the warrants had to get restrike and they had to get restrike for two terms. So I was actually in those warrants for a brief period of time and we'll chalk it up to better lucky than good because I made a little P&L and got out of the way. But you're exactly right. That is the exact business where this is a really interesting story, but you can quantify. We need a lot of capital to get from where we are today to where we break even on profitability standpoint. And the redemptions there were over 90%. And so you kind of set yourself up for failure, or maybe you just didn't bet on the right market cycle, thinking that, okay, I'm going to do, I'm going to take two steps forward and I'm able to raise more money. But the market already told you with those redemptions. And I'm sure they tried to raise a bunch of pipe money along the way that, no, we're not ready to back you. And so I just, you know, I keep going back to, you know, a lot of these biotechs have that.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I'm thinking of Starry S-C-R-Y, which Goldman Sachs, I was at short it, and Goldman Sachs said, oh, yeah, it's trading. It's cheap. It's like only trading at 10 times 2027 EBITDA. And it's bankrupt. It has a Q ticker.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Liquidity is dried up as well. But there's no question that one of the big issues here is how do you get from A to B? And you didn't finance it, but you acted like you financed it, so you were spending and just hoping that you could raise later. And that's when a big problem, again, not just for SPACs, but for kind of some of these earlier stage companies.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“Guidance that they've provided, and it's pretty much a bet they're turning on their first facility, assuming it's on time sometime this month, and they're either going to make this carbon negative plastic that they say they can make or they won't. And if they do, it's a really interesting story. And if they don't, then it's not such an interesting story. So, you know, I do think there's going to be some opportunities there. The interesting question, or actually the interest question, but one of the challenges has been because of these high redemptions, you've seen a lot of these DSPACs kind of come public without enough capital to bridge themselves to profitability. And the market is really sophisticated, whether it's investors wanting to avoid that risk or investors wanting to be short that risk. And so you've seen a lot of companies candidly file for bankruptcy within 12 to 24 months of their DSPAC because they waive that minimum cash. Now, I don't think the result would have been any different per se if they stayed private because we all know that the private market.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT
“There's a couple believe it or not, there's a couple of biotechs, and I always laugh because as you saw in my prior letter, I'm kind of begging the SPAC sponsors to move away from the biotechs and more towards kind of the more mature companies. But you've seen an energy company. There was one, the ticker was LFG. It was acquired for a premium above. So there's definitely been a handful, but you really have to do that analysis of, let me dig in. Let me look at all these fact deals. Let me take away the ones that are not revenue producing or take away the ones that aren't cash flow positive. And as you keep digging in there, you'll probably see better and better and better. One name that I've spoken about in the past, which unfortunately meets the VC characteristic, is this company called Origin Materials. And I think it's super interesting, you know, the stock's $5. It obviously despacked at $10. So the return to investors have been terrible, but it's one of those where they've actually been hitting all of their non-financial.”
2023-06-19 · Forward Guidance · SPACs Are Bonds, Actually | Louis Camhi · IDENTIFIED FROM THE TRANSCRIPT