SPAC updates, public/private market overview, Putin's end game & more

The episode opens with banter. One host says he is in a "very Daniel Plainview mood" and claims a competitive streak, saying he does not like to see others succeed. Others push back that the character is nothing like him and bring up a roast at a birthday party. The exchange is jokes rather than argument, and the ASR text is badly garbled in places.

A host notes that people keep asking what Chamath will do with his SPACs, confirms that IPOF is being wound down with the money returned to investors, and mentions that Bill Ackman also wound down his vehicle, returning 4,000,000,000. He adds that more than 500 SPACs are still looking for deals.

The answer, which the transcript does not label by speaker but which responds to a question put to Chamath, says ten SPACs were raised and six deals done. The sector split is garbled in the transcript (it mentions technology, foreign tech and biotech), so it is not restated here. The speaker's main argument is about timing: a deal signed today may take six or seven months to close, and if the price falls in that window, investors can redeem and get back the initial $10 they paid per share.

In the speaker's telling, the market was too volatile to justify putting in at least $100,000,000 per deal, so winding down was the responsible choice. He says it will cost him roughly 10 to 20 million dollars in setup costs, and that returning the $10 is better than what the market would likely do over the next five or six months. These are his own judgments, not established facts.

Asked whether a shortage of great companies was the issue, the speaker says early on there was interest from Silicon Valley CEOs once some deals succeeded. Later, valuations became the obstacle. His team's estimates came in, he says, 50 or 60 percent below a company's last private valuation, and boards that would have to mark down their private assets were reluctant to accept the deal.

The second obstacle was volatility. The speaker argues that CEOs, CFOs and investor relations teams find it easier to go public when markets move steadily in one direction, and that swings unrelated to the company made many of them nervous. He sums up the first problem as the inability to find market clearing prices for assets.

The speaker says he has been clear since November that the marginal trade should have been trimming risk, and asks for a clip to be played. He also says one company had a public blow up this week over the same issue, but the transcript does not name it.

In the clip, recorded after Q3 earnings in November 2021, he lists what he saw at the time: stocks, crypto and art markets at all-time highs, inflation at a 30 year high, 10 year breakevens at a 25 year high, and large stimulus spending. He also says Elon Musk and Jeff Bezos had together sold more than $11,000,000,000 of holdings that year. His conclusion was that people who sneered at managing risk were naive. These figures are as stated in the clip and have not been checked here.

Back in the present, the speaker says he sold about $100,000,000 of SoFi after tweeting that he was starting to sell, then kept selling systematically to manage his own liquidity. His broader point is that markets do not always go up, that you should weigh many pieces of information, and that nobody can outsource a decision to someone else. He still reads hedge fund 13F filings to see what he might be missing, but says he takes responsibility for his own choices.

A host says every SPAC sponsor he knows has stopped looking for targets and expects to wind up and return capital, and asks how many of the roughly 500 will find a deal. The speaker replies that some good deals remain, though not necessarily in tech. He mentions agriculture and energy, where his group spent time looking at natural gas and oil producers, terminals and LNG facilities, noting that the return profile is very different from what they were used to.

His prediction is that the overwhelming majority of tech SPACs will simply wind up. Some sponsors, he says, will take any deal to monetize their founder promote, but with this volatility such deals are likely to trade down sharply. He expects most to find no home, while a few may find targets in energy or agriculture, citing a deal a co-host did, whom the transcript spells "Freiberg".

He does not think the SPAC will disappear. He calls it one tool among IPOs, direct listings, private fundraising, convertibles and structured deals, and says it let companies such as SoFi and Opendoor raise billions of primary capital from hedge funds and mutual funds that would otherwise have been hard to get. The amounts are garbled in the transcript. He expects a washout of sponsors who cannot find targets.

A host asks how late-stage private companies, many doing layoffs and with valuations underwater, think about SPACs, direct listings or IPOs. The reply, from the person addressed as Saks, is that going public "seems like a fantasy at this point" and that the public market exit may be frozen for two years. He frames this as what people are probably thinking, not as a measured fact.

Asked how these companies work out valuation problems when late-stage investors may refuse a haircut, the speaker says they are using their war chests to grow into their valuations, and that smarter ones will also slash burn. He then turns to the week's Fed meeting, which raised rates another 75 basis points as predicted. What was new, he says, was the forecast: another one and a half percent to come, compared with a plan two months earlier of 75 at this meeting plus 50 after it.

The speaker says the Fed's forecast moved by an extra 100 basis points of rate increases in two months because inflation is worse than it expected, and that the last inflation print did not improve as fast as people wanted. He argues the trajectory is "bad and getting worse."

In his reading of the FOMC comments, Powell has moved from saying rates could rise without a recession, to a mild recession, to something close to a hard landing. He calls it a bad week for the economy, and says markets are retracing to within about 5% of the June lows, with growth stocks hit hardest. This is his interpretation of the Fed's remarks.