SPACs Are Getting SMACKED

Once the golden child of Wall Street and retail alike, SPAC mergers are now falling in two ways — falling apart and falling down. 👎

Let’s dig into the “falling apart” part. A Bloomberg article published today claims that SPAC mergers are “falling apart at a rapid pace.” That’s literally the headline. The article then claims that 22 deals have been spiked since the middle of 2021, which compares to 26 called off in the five years prior. 😬

The article suggests that many deals have fallen apart because of redemptions — which stem mostly from disinterest in deals. In recent weeks, we’ve seen this first-hand as Binance picked up the tab for a $200 million investment in Forbes. The tab was run up by committed capital from large money managers, which then decommitted and offered some cap space for an enterprising new investor. However, Bloomberg also mentions some other companies by name — Acorns, Reservations.com, and Pioneer, to be specific. 

SPAC mergers aren’t just falling apart — they’re falling down. The Defiance Next Gen SPAC Derived ETF, or $SPAK for short, tracks some 373 holdings. It’s a mix of SPACs seeking a merger, SPACs which have issued Definitive Agreements (DAs), and SPACs which have merged. Among the top holdings are stocks such as Lucid, Grab, Pershing Square Tontine Holdings, and DraftKings.

One crucial takeaway from the $SPAK ETF is that money is drying up in the once star-studded space. $SPAK is down 48.8% in the last year, which is an even worse than the return posted by its IPO-tracking cousin, the Renaissance IPO ETF. $IPO is down 39.4% YoY.

So, what’s the takeaway? Everybody is getting hammered by newfound macroeconomic and geopolitical tension 🥊 — but perhaps no more than the market’s newest entries. All those pandemic-era IPOs and SPACs, which turned into hot momentum trades, are not faring so well in this cold market. 🥶

Based on how things are looking, there might be a lot more downside still to come… or maybe this downward trend will invert and all the new names will go to the moon?! That’d be great, right? 😂 Jokes aside, nobody knows what comes next… or maybe you think you do. Tell us what you think lies ahead in the $IPO and $SPAK streams!!

Texas is suing Facebook parent company Meta over claims that the social media platform violated Texas law with its facial recognition technology. ⚖️

Facebook’s facial recognition technology is no longer being used by the platform, but the Lone Star State certainly doesn’t care about that — Texas Attorney General Ken Paxton is pursuing hundreds of billions of dollars in civil penalties ($25,000 for each of the 20 million+ Facebook users in Texas, ouch) for the platform’s technology. Paxton commented:

“Facebook has been secretly harvesting Texans’ most personal information—photos and videos—for its own corporate profit. Texas law has prohibited such harvesting without informed consent for over 20 years. While ordinary Texans have been using Facebook to innocently share photos of loved ones with friends and family, we now know that Facebook has been brazenly ignoring Texas law for the last decade.” Someone’s not happy…

According to Texas’ allegations, Facebook’s facial-recognition technology stored data about users’ facial geometries, which are considered to be highly-sensitive biometric identifiers by the state’s law. Texas alleges that the platform stored and profited from biometric identifiers without user consent, even though Facebook has already discontinued the controversial technology. 🧬

This isn’t the first time Facebook is in legal drama over its biometric data — a class-action lawsuit filed in Illinois required the platform to fork over $650 million in penalties for similar allegations.

Meta responded that Texas’ allegations “are without merit and we will defend ourselves vigorously.” $FB fell just 0.84% today, but the stock is down 37.4% over the last three months and it’s down 35.3% YTD.

Unless you’re engaged with politics, you are an ardent Democrat, or you’re a resident of the state of West Virginia, the name Joe Manchin is unlikely to elicit a reaction. In fact, the name might not register at all. 🤷 However, for the unacquainted — Manchin is perhaps the most disliked Democrat in the Senate.

He collects anger from the political right and from many members of his own party. Manchin has become a hot-topic in political spheres because of his opposition to the Biden Administration’s progressive agenda — namely Biden’s flagship political treatise, Build Back Better.

Moderate Democrats (like Biden) dislike him — but Progressive Democrats (think AOC and Bernie) hate him. And you can bet your bottom dollar that if Democrats lose ground in November (fair to moderate odds as of this writing), many will be clamoring to fault Manchin for the loss.

However, Manchin’s latest war cry is a surprising ask — he reportedly wants Democrats to revisit tax-rate hikes in order to arrest the country’s inflation and debt problems. If he gets what he wants, it might even put pressure on the Democrats’ final voice… controversial moderate Democrat, Kyrsten Sinema (D-AZ), who has resisted rolling back GOP tax cuts.

Manchin laid out his asks for the tax-and-spending bill in December 2021, saying that he wanted a “slimmer bill” that “overhauls the U.S. tax code to make it fairer … [and lowers] the cost of a broader array of prescription drugs than the current bill.”

Ultimately, Manchin’s support increases the likelihood that Biden’s agenda (albeit, boiled down) will see the light of day again. In the case Manchin can somehow muster some support out of Sinema, then we could see higher taxes coming for corporations and rich Americans as early as tax year 2023. 📈