By P. Gunasegaram
Much has been said about special purpose acquisition companies or Spacs. But as far as Tiger is concerned they offer a means to make quick money — not for the investors — but for those who promote them. Not intending to be left behind, Tiger jumps on the bandwagon and intends to be off by the time the tide turns.
Tiger is a tad sad, and disappointed — waited for the postman these past few days but no reply. And then remembered those sacks of mail abandoned down a ravine near a forest. Bounded down there, but nary a mail for Tiger.
How stupid of Tiger! Of course its the age of the Internet. Tiger was slow to catch onto this new human fad but recently got itself on Google. Fumbled with the mouse, as Tiger’s paws aren’t exactly equipped for these things.
Ah, yes, there was an e-mail, could this be it. But it was from a long lost relative from Bengal. As exciting as that was, it was not as exhilarating as what I was waiting for. Where was the offer for the job Tiger applied for?
Regular followers of the Tiger trail will remember that Tiger put in an application — for the top post at Felda Global Ventures, did all the necessary lobbying but never got it. Must be all that discrimination and the fear they might find someone who can do the job.
Never mind, something else will turn up. Does it not always?
Which set Tiger thinking. Ever heard of Special Purpose Acquisition Companies or Spacs for short? Tiger’s eyes fairly popped when he read about this strange breed of company which first appeared in the US, Tiger believes, and was imported into this country. Tiger immediately decided it wanted to start one, why maybe even a family of them.
If you were wondering what a Spac is, Tiger’s coming to that right now. A Spac is started by some so-called experts in something or other who want to buy something or other for a business but don’t have the money for it.
So they ask you and me and anyone else for some via an initial public offering on the market, giving in return shares and warrants (a right to get shares at a predetermined price). Trouble is they don’t know — yet — what they are going to buy and you give them up to two or even three years to do so.
The consolation is that they come back to you and me if they find something for approval. Then, at a shareholders’ meeting, if we approve, they buy. In the meantime, they have all their expenses paid for.
You all know by now Tiger’s penchant for business and first class flights and five star hotels, caviar and champagne, and gourmet meals, and…..I shall stop right there, enough said. But to Tiger that sounds like a great deal don’t you think.
Jet-set around the world, live it up for a couple of years, dine and wine and ….get paid for all of that and at the last minute come up with a deal that shareholders will approve or have less than their original investment back.
Why Tiger could get that hog which lives round the bend on the river to sell its land to the Spac — who knows it may have some onshore oil if we drill for it. If it does not, perhaps it might work as a river view resort. It’s nice there alright but when it rains, well, the colour of the water looks unappetisingly like badly made teh tarik.
But never mind the muddy water; which Spac shareholder is going to have the guts and gumption to venture where no man has been to check the land and the scene out for himself? All they are interested in are easy pickings and they don’t come easy.
Tiger knows the easiest prey is the greediest type — those who are too absorbed with eating to notice that there is someone out there waiting to eat them up. And they will be struck down when complacency sets in. Wham! And they are gone.
Well, Tiger never bets against superior forces, including those of the market. Go with the flow, is more his style. If there are idiots out there who would pay me in advance to find some dubious asset for them, Tiger will be more than glad to oblige. It will strike that deal with the hog downriver, inject the assets at an inflated price, and share the spoils.
Oh, it is just too easy.
If you are wondering why people invest in Spacs, Tiger is coming to that too — they want higher returns. You see more people are getting greedy, not just the rich private equity types. Even the unknowledgeable Ah Chongs, Ahmads and Athis want some returns. So they gave them Spacs. Returns? From Spacs?
Tiger did some research, from Wikipedia of course: “Since 2003 approximately US$20.4 billion of SPAC capital has been raised and 158 SPACs have been funded in the United States. Of the 161 SPACs that have been raised in the United States, 72 SPACs accounting for US$6.5 billion have completed an acquisition with annualised returns to investors of -1.2%. Approximately 17 SPACs accounting for US$3.4 billion have announced transactions with annualised returns to investors of -15%. Approximately 23 SPACs accounting for US$6.5 billion are currently seeking an acquisition with annualised returns to investors of -16% and 49 SPACs accounting for $4.47 billion have liquidated with annualised returns to investors of about -2.5%.”
Such horrifically abysmal returns!
There is much more than meets the eye when it comes to Spacs. It is illogical to expect that if you give so-called experts some money, they will make it for you. If they can, they will make it for themselves first. As a lawyer told Tiger this morning, never trust your money with someone else — he should know, he deals with breach of trust and nothing else!
Spacs in Malaysia are hot these days; one newspaper even says that they sizzle, in an almost irresponsible invitation to readers to punt. But Tiger believes one day Spacs here will be just too hot to hold with dire consequences for those left with the burden in this dangerous game of passing the parcel. We know it will be the poor sucked-in small investor who will burn at the end of the day.
But meantime, watch out for the Tiger SPAC — nice name that — that will make Tiger a rather fat, contented cat which would have made its bundle long before the stumble.
PURRRRR!
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