You grossly misunderstand SPACs if you think they shoot up at least 4x on announcement & hype.
This is a very rare phenomenon, and even with the most prominent SPAC sponsor (Chamath), of his current 4 SPAC deals that are post-DA, only 1 has exemplified what you characterize (Virgin Galactic's $55 ATH). The others have never broke $40 or above. This includes every SPAC he has been in the PIPE (5) with exception of 1 (NYSE: MP) which has broke $40.
Therefore, of the 9 post-DA SPACs that have had some form of association with the one of the most popular SPAC sponsors (Chamath), only 2 exemplify what you describe.
However, I do agree with the general premise of your comment. SPACs without founder and PIPE lockups are most likely destined to perform poor in the long term.
Is this a big scam? Considering the fact that most of the 130~ SPACs that have a DA do not fit into your characterization (most do not shoot up even 2x after LOI/DA announcement & hype, most sponsors have not cashed out - whether that be peak or not, most do not trade at $15 but rather way closer to NAV), I would be inclined to say they are not scams in that regard. I would say they are unfair rather than scams (most SPACs have a high % of founder shares, no lockup etc).
Ok maybe I should have said my description is the ideal scenario in the eyes of SPAC creators. Obviously not every one will have a 4x price surge, and not every one will completely tank. There's a reason why they try to attach celebrities or well known businesspeople...purely to build hype. If you (and the creators of the SPACs) agree they're destined for poor performance, how is it not a big scam?
It's kind of like around the time of the Dutch East India Company when tons of bogus companies popped up and publicly sold shares that completely tanked shortly after (e.g. a company claiming it invented a perpetual motion wheel machine, etc).
I'm referencing tickers such as APPH, NKLA, HYLN, THCB, LACQ. I'd wager a bet that most of the early investors for these examples are already cashed out at a significant profit knowing they would tank shortly after they did.
I would break SPACs currently in the market down into 2 categories; pre-DA and post-DA.
In other words, there are a number of SPACs which have already posted their target company, their financials, future projections, as well as other things like PIPE investors, % SPAC ownership etc. Most of these, due to the current climate, are trading at or slightly above NAV, therefore, they are akin to buying stock in any other company with a small downside if the deal does not materalise [1].
What you would be referring to in your example are pre-DA SPACs, in which you are correct as it relies on the sponsors prior performance and praying they will find a good target at an appetizing valuation. However, even here there is a small downside, since of the 430 SPACs searching for a target [1], the majority are trading at or below NAV with very few breaking this rule, which is why it is so lucrative for investors and arbitrage HFs.
For instance, if you do proper due diligence on a particular SPAC sponsor and have mild conviction on their ability to obtain a good target, chances are their SPAC is trading at or below NAV, therefore, it opens an opportunity to invest in something near risk-free. If a deal does not materalize, then you get $10 (or NAV) back, and if it is a good target you reap relatively good rewards. If it is a bad deal or you do not like the company, you have the ability to sell at or near the same price you bought (provided it was close to NAV), since very rarely in the window of post-DA to de-SPAC will the SPAC price fall below NAV. The only significant downside is opportunity cost since the core idea revolves around parking money and not utilizing until the sponsor announces a deal, and other investments even in index funds may have provided higher returns in that timeframe, which could be a good or a bad thing, especially in volatile markets.
"while undermining the transparency requirements of the market"
Then why don't you propose to just ban forward-looking projections and including more transparency?
SPACs have their distinct use cases and have unique advantages and disadvantages compared with IPOs & DPOs. A blanket-ban on these vehicles is, in my opinion, limiting optionality, which wouldn't be a problem if the IPO & DPO processes were perfect, however, they are not.
Ackman is both. He is an activist in some of his plays, however, as can be seen through his publicly traded fund $PSH, most of his investments are long-term value investments which is also the sentiment echoed in his investor letters/presentations.
However, to the point of his SPAC vehicle - $PSTH, he has already stated in some interviews that he is not always looking for activist plays, and that $PSTH does not need to be one.
You are generalizing too ambitiously. It is true that (for the most part) reputable companies do not need SPACs. However, that is not the same as saying there is a close-to-zero chance for a SPAC to land a high quality company.
I have numerous friends in IB who specialize in this, and I have been told that $PSTH has a high chance of landing a 'quality' target. The scale of $PSTH is huge ($4 billion guaranteed capital + $1 billion-committed capital from $PSH which can be extended for a further $2 billion). This is $5bn-$7bn guaranteed capital. In fact, this is one of the biggest IPOs on the NYSE (IPO for the vehicle Pershing Square Tontine Holdings). As Ackman has said numerous times in interviews, many companies that are planning to go public do not like uncertainity. This is a way to avoid that. Not to mention the fact that in late-2020 Ackman confirmed he is launching PSTH2 which appears to have the exact same structure; high amounts of guaranteed capital, low dilution & fees.
Of course, "high quality companies" is a subjective term, however, I have no doubt that any company obtaining $5 billion after the reverse-merger will be a company well-established in thier respective field and can be argued as being "high quality". For the record, I do believe there is a close to zero chance of $PSTH reverse merging with Stripe or Starlink. I think they were founded on pure speculation by various other social media communities.
Elon already said Starlink is not going public for a while because it doesn't have the cash flow yet. Ackman said on BLOOMBERG TV that Stripe & Airbnb said they were not interested in using his SPAC. Patrick and John Collison have both been very anti going public and so I doubt they will have a change of heart. They also have voting control of the company.
The only real possibility is Bloomberg LP, although Bloomberg had denied the rumors.
It's also funny that everybody seems to forget about Valeant and Herbalife...
"The only real possibility is Bloomberg LP, although Bloomberg had denied the rumors"
And how did you come to this conclusion? There are many, many private companies that fit the criteria outlined in the S1.
"It's also funny that everybody seems to forget about Valeant and Herbalife... "
I have not met a single person who does not think of those events when discussing about Ackman. In fact, during his COVID-19 short & CNBC interview, there was no shortage of discussion about Valeant and Herbalife on financial twitter/Reddit/news comments.
I think it is important to note that PIPE investors will always purchase SPACs at NAV (usually $10) with only very rare exceptions. NAV is where most of the SPACs are currently trading due to the recent pullback. Therefore, it is only more favourable when the SPAC is trading above NAV, and this is extremely uncommon [1].
Just to add, 15 mins ago Chris Bing from Reuters and other journalists confirmed the U.S. Department of Homeland Security to be the 3rd agency to be impacted [1].
I suspect there will likely be further agencies and of course private companies to come forward in the upcoming weeks/months.
I salivate at the potential of seeing the industry turned on it's head and these tools being leaked. I know there are great firms out there, but a lot are snake oil nonsense.
This is a very rare phenomenon, and even with the most prominent SPAC sponsor (Chamath), of his current 4 SPAC deals that are post-DA, only 1 has exemplified what you characterize (Virgin Galactic's $55 ATH). The others have never broke $40 or above. This includes every SPAC he has been in the PIPE (5) with exception of 1 (NYSE: MP) which has broke $40.
Therefore, of the 9 post-DA SPACs that have had some form of association with the one of the most popular SPAC sponsors (Chamath), only 2 exemplify what you describe.
However, I do agree with the general premise of your comment. SPACs without founder and PIPE lockups are most likely destined to perform poor in the long term.
Is this a big scam? Considering the fact that most of the 130~ SPACs that have a DA do not fit into your characterization (most do not shoot up even 2x after LOI/DA announcement & hype, most sponsors have not cashed out - whether that be peak or not, most do not trade at $15 but rather way closer to NAV), I would be inclined to say they are not scams in that regard. I would say they are unfair rather than scams (most SPACs have a high % of founder shares, no lockup etc).