Hope you’re having a great weekend. I finally caught up with watching Ted Lasso, and it was definitely worth the 7 Emmys. What a brilliant show! But because I binge watched it over a couple days, I seem to have picked up ‘wanker’ and ‘twat’ as my new go to swear words. Hopefully that’s temporary. And if my friends are to be believed, I was also seen sporting some British accent over the weekend. Sorry mates, but I just can’t seem to help it!
There is another word that is used quite a lot in the show and caught my attention — the word is ‘relegation’. It basically means transfer of the sports team/player to a lower division because of poor performance. And as I was thinking about that word, it resonated with me in the context of SPACs. Because let’s call a spade a spade — ever since the bottoming of the SPAC market in March, and the corresponding emergence of crypto and meme stocks, the SPAC team has suffered relegation because they just haven’t been able to deliver the quick alpha that the retail investor crowd has gotten accustomed to. Again, let’s remember that in 2021, we are not playing games of quality, we are playing games of volatility and momentum.
And now as we enter Q4, I have a feeling that SPACs will continue to be in the dog house because this quarter is shaping up to be led by Energy and Crypto. Below is a YTD performance chart of SPX, DJIA and Nasdaq 100. I also plotted the three rival teams – SPACs ($SPAK ETF), Crypto ($GBTC Grayscale Bitcoin ETF is the only proxy with long enough history), and Energy ($XLE). And as much as I hate to write it, the SPAC team has earned its relegation, with a YTD return of -20.19%.
I want to emphasize that I’m commenting on the overall sector and its relative performance, and not individual SPACs. I remain currently long many SPAC names in my portfolio but at the same time, I don’t think the sector sentiment is favourable as we think about the next couple of quarters. Unless of course, we have our own Ted Lasso moment, where Chamath comes to the rescue. But as it currently stands, the google searches for ‘Chamath’ are down to their lowest since peaking to a 100 back in January. However, I do feel that his next deal (whether $IPOD or $IPOF), is going to be structured such that it shows incredible alignment because given how the chocolate boy rolls, his ego needs to be constantly pumped and the $CLOV fiasco and his selling out his $SPCE stake have not particularly served as those ego boosters.
Searches for ‘SPAC’ are also down and have hovered around the 25 level mark since May. And the current sentiment doesn’t seem to indicate any change in this sideways trend.
But searches for our friend Gary Gensler seem to suggest a bit more momentum. Funny but not that surprising that he’s getting the most amount of hits from China!
However, one interesting trend piece was that over the last 12 months, the highest amount of SPAC searches have been for the following names –
$AGC – Altimeter Growth Corp/ Brad Gerstner (Pending merger with Grab Holdings) (I’m currently long)
$SOFI – De-SPAC (Merged with $IPOB/ Chamath Palihapitiya) (I’m currently long)
$MTTR – De-SPAC (Merged with $GHVI/ Alec Gores) (I’m currently long)
$ME – De-SPAC (Merged with $VGAC/ Richard Branson)
$CLOV – De-SPAC (Merged with $IPOC/ Chamath Palihapitiya)
Coming back to Chamath for a minute, I do feel that the reason he’s taking this long to announce a deal is because he wants to be deliberate about resetting the ‘democratization of the IPO’ narrative. And we know he likes to make a big statement. So I do feel quite positive that he is very motivated to deliver back to back great deals. And if that happens, then besides boosting his ego, it may also be a potential catalyst for the sector to turn around. But until then I am generally skeptical.
And so going back to the other teams in the league, my energy is drifting to the Energy sector, and I have added some exposure to it. I am by no means an energy expert, but it seems like common sense that going from a carbon economy to a green economy is a process and not an instant switch. But seems like we took common sense for granted again, and here we are at the inflection point of a doozy that is going to be this energy crisis. For those of you who are interested, Kuppy is my fav on the subject. And if you have any Energy recommendations for me, then I’d love for you to slide them in my DMs 🙂
Gonna leave you folks with my favourite quote from the show –
Have a great week ahead,
Nikita's Substack Feed
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