value and opportunity

I have covered the current SPAC Mania already in a post in June on Nikola, but since then SPACs only seem to gather more steam.

VC legend Bill Gurley (Banchmark Capital, Uber) has released an interesting post on the three main venues for a company to go public: A “classic” IPO, a simple listing and finally the SPAC.

I’ll try to summarize his post:

• he argues that the IPO process is “broken” and rigged by the I-Banks. His proof is that on average, IPO’s are “Popping”  ~20% on the first day of trading which means that this difference, multiplied by the number of shares placed, is “stolen” from the previous owners (i.e. himself as a VC)
• on top of that, companies have to pay IPO fees
• The reason is that banks prefer special clients and do not really match demand and supply
• as direct listings (Spotify) do not allow to raise large amounts of money, reverse mergers with SPACs are preferable
• He argues that SPACs have “lower cost of capital” than IPOs but doesn’t give any examples. His main “proof” here is that there are so many SPACs now and that companies can negotiate really hard.
• and of course the way to public markets is a lot faster for a SPAC

Bill Gurley is clearly not an idiot as he most likely is now a billionaire following some very impressive investment successes (Uber) with Benchmark capital. However I do think that his arguments have some serious flaws.

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This post is written mostly for myself in order to document my thoughts and actions and to learn from my obvious mistakes. But I promise that the blog won’t turn into a short term trading site !!

Today was a lot worse than I expected. Who would have expected that OPEC members disagree and the Oil price would tank more than 30% overnight ? In general, lower oil prices are good for most economies, but such a move will create some issues with regard to margin loans, counter party risk, indebted frackers etc etc.

So instead of the expected Monday “Corona panic” we have now the “Corona + Oil super panic”. Plus some strange moves like the EUR gaining strongly against the USD, despite Europe always being in the weaker position, even now with the Corona Virus.

Nevertheless, I started to put some money at work. Surprisingly not in the tourism sector, as I need to do more homework there.  Not everyone might have read the comments but this is what I bought today:

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Kinnevik

Kinenvik was an investement I first looked at in December 2017 and then decided to invest in late 2018 however only up to a 1,5% allocation.

As mentioned in the comments by a reader. since then a few things happened. From the market side, first their Zalando stock cratered and then recovered. What worries me more is the flurry of personal changes including Christina Stenbeck, the heir of the major founding family completely leaving the board. Personally; i also didn’t find their main new investment, online Grocer MatHem, very convincing. Overall, I am slightly underwhelmed from the strategic perspective. I don’t know enough about the Nordic Telecom market and if I really like Zalando, I could buy them outright. The non-listed part at Kinnevik is just to small to make a difference and the changes in the Board are hard to understand.

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