In my last post I wrote about the 20% dilution for average SPAC purchasers, and how that 20% is gifted to the sponsor. But in one of the two examples of cashing in that I shared it left open the question ‘What about John Henry, he’s not a sponsor, what did he get out of it?’

Quite simply, he got an excellent opportunity to begin cashing out. Was the SPAC purchase of part of his company done at a reasonable valuation? In this particular instance I have no idea, but overall I suspect that owners selling to SPAC’s are receiving very favorable prices and terms that would not be paid in traditional private markets or in an IPO. While I didn’t want to take the exhaustive amount of time needed to evaluate John Henry’s sale price, I knew that the main conflict of interest in SPAC’s – close a deal, any deal – would make rich hunting grounds for those who do have the time and incentive: short sellers.

[Read more…] about SPAC’S Suck Pt. II