Wall Street Games

I think this is going to be a short post since I’m no expert on this topic but I have been seeing this topic quite a few times in the last few weeks. That topic is: SPACs, the newest fangled craze from Wall Street (BUT, they been around for a while). Apparently SPACs have gained traction amongst the investment world. SPACs sound like a blank check acquisition vehicles where shell companies with no operations are listed on the stock market just for the purpose of acquiring private companies, BUT the target companies are unknown. Let’s say this again, the investors in the SPACs have no idea which private companies will be bought.

Sounds ripe for abuse.

These private companies can gain money without having to go through the IPO song and dance. Typically in an IPO, the company executives have to give presentations to investors to convince them to buy into the IPO. I believe the investment banks do a due diligence before such companies attempt to go public. But if private companies take the SPAC route, they get to skip the due diligence and the presentations.

Sounds shady.

SPACs do have a two year limit to make an acquisition before they have to return the money plus interest back to the investors, so these SPACs are not an infinite vehicle to pour money in.

Still, they sound highly risky for the investors because the ultimate acquisition is unknown and the acquisition could be a dud.

The other item in the news is the cryptocurrency: their value seems to be increasing. I don’t really know what value they provide other than no government have control over the cryptocurrency. But if no government have control, then there is also no backstop for when things go south. No one is ready to stand behind the various cryptocurrency, so if they go south, the investors could conceivably lose everything very quickly.

When you make an investment in a company stock, you are investing in the value that the company provides to their customers, whether it be a product or service. Cryptocurrency doesn’t provide that value; it doesn’t do anything as far as I can tell. The only thing I’ve heard is that in order to generate a cryptocurrency, a lot of electricity, thus a lot of energy, needs to be expended in order to “mine” a cryptocurrency. So, it seems like there is an adverse impact on climate.

Again, no value.

There is just too much craziness going in Wall Street as people search for the quick buck in newfangled ideas.