March 17, 2021

Shaq SPAC Under Attack? SEC Cautions On Celebrity SPACs

In news that I’m delighted to say has nothing whatsoever to do with ESG, the SEC recently issued an Investor Alert about celebrity involvement with SPACs. Here’s the gist of it:

The SEC’s Office of Investor Education and Advocacy (OIEA) cautions investors not to make investment decisions related to SPACs based solely on celebrity involvement.

Celebrities, from movie stars to professional athletes, can be found on TV, radio, and social media endorsing a wide variety of products and services. Sometimes they are even involved in investment opportunities such as special purpose acquisition companies, or SPACs, as sponsors or investors. Those celebrities may even be well-known professional investors.

However, celebrity involvement in a SPAC does not mean that the investment in a particular SPAC or SPACs generally is appropriate for all investors. Celebrities, like anyone else, can be lured into participating in a risky investment or may be better able to sustain the risk of loss. It is never a good idea to invest in a SPAC just because someone famous sponsors or invests in it or says it is a good investment.

I know that most of you likely had the same reaction to this that I did – How can the SEC issue something like this during this very difficult time for A Rod & J Lo?

America may not be #1 in a lot of stuff anymore, but I’ll match our celebrities against anybody in the world. During the past couple of weeks alone, Meghan & Oprah caused the British monarchy more heartburn than George Washington or Mahatma Gandhi ever did, Geraldo entertained the Buckeye State by almost simultaneously announcing that he was, and that he was not, considering a run for the Senate, and Kanye reportedly offered to buy Rye, New York for $100 million & rename it “Ye,” which is totally sane and very cool. Meanwhile, the biggest professional investor celebrity SPACer, Bill Ackman, has been busy trying to both cultivate & stay one step ahead of the “Stonks” crowd on Reddit.

I guarantee that an investment in a SPAC sponsored by any of these folks will provide much greater entertainment value than an investment in other SPACs. I also bet that when the dust settles, public investors in celebri-SPACs  & public investors in more mainstream SPACs will achieve just about the same really crappy return on their investments. So, to paraphrase the great American patriot Patrick Henry, I say, “I know not what course others may take, but as for me, give me Shaq SPAC or give me death!”

Financial Reporting: Big Year for Goodwill Impairment

If your company took a big goodwill impairment charge last year, it probably won’t come as a big surprise to learn that you weren’t alone. According to this Duff & Phelps report, goodwill impairments in 2020 were at their highest level since the financial crisis:

At the time of writing, the disclosed top 10 GWI events for 2020 reached a combined $54 bn, far surpassing the top 10 in 2019. Although full 2020 calendar year-end results for U.S. public companies will not be known for some time, early reporting points to overall GWI already exceeding $120 bn in 2020. For perspective, in 2008, at the height of the global financial crisis, U.S. companies recorded a total GWI of $188 bn, according to our prior studies.

According to the report, the energy sector took the biggest hit – approximately 34% of energy companies with goodwill on their books recorded an impairment charge. Duff & Phelps says that if 2020’s impairment charges don’t top financial crisis levels, we can thank the Federal Reserve & federal government for repeatedly firing their cash bazookas.

Sold! Glass Lewis Moves From Activist to Private Equity Ownership

Yesterday, Glass Lewis announced that it had been sold to the Toronto-based private equity firm Peloton Capital Management & its Chairman, Stephen Smith.  Here’s the press release. As most of you know, Glass Lewis’s previous majority owner was an activist investor, the Ontario Teachers Pension Plan. Now that it’s in the hands of private equity, you’ll have to decide for yourselves whether there’s been a disturbance in the Force.

John Jenkins