April 28, 2021

SPACs: Pop Goes the Bubble?

Last week, Liz blogged that the SPAC bubble was leaking. This week, S&P Global declared that the bubble has popped – and that SPACs have gone the way of tulips & dotcoms:

Even for a financial mania, SPACs didn’t last long. These highly speculative schemes have whipsawed from nowhere to everywhere and now back to nowhere – all in a matter of months. Live fast, die young.

Our obituary for the short-but-colorful life of special purpose acquisition companies (SPACs) is a bit facetious, of course. But there’s no denying, to use a metaphor favored by cynical Wall Streeters who have seen this sort of thing before, that the SPAC bubble is no longer being pumped up like it had been. Why the deflation? SPAC saturation.

In Q1, an average of more than 90 new US-listed blank-check companies each month successfully raised money from investors, according to S&P Global Market Intelligence. So far in April, the rate of issuance has plunged about 80%, with the full-month total tracking to just 14, our data indicates.

The article notes that instead of investors, the group that’s looking most closely at SPACs right now seems to be the SEC – and that’s a pretty clear signal “that a boom has gone bust.”  That may be true when it comes to IPOs, but there’s a whole lot of money sloshing around in SPACs that are desperately chasing de-SPAC deals, so it’s likely that there’s another chapter in the SPAC boom story that has yet to be written.

NFTs: Playboy Hits the Jackpot 

I really wasn’t planning to blog about “non-fungible tokens,” or NFTs, which in case you haven’t heard are the latest grift gift from the Blockchain crowd. As befits my grumpy boomer persona, I’m as dubious about the merits of NFTs as I am about the merits of crypto.  But then I saw some news that made me think that if I were a little less jaded about innovations like these – and the prospects of certain adult-oriented SPACs  –  I’d have a few more dollars in the bank.

A few months ago, I blogged about how Playboy Enterprises was looking to merge with a SPAC.  I  dismissed Playboy’s business prospects as being out of step with the zeitgeist & the transaction as perhaps representing “peak SPAC.” As usual though, I was the one who was out of step.  According to CNBC, Playboy’s stock is up over 80% this month alone & 173% since February.  Why? Apparently dirty pictures & NFTs are a match made in heaven:

These days, announcing a new investment in a legacy media business is enough to draw a raised eyebrow. That is, of course, unless the company is reinvented nude magazine publisher Playboy — now PLBY Group — whose stock has surged more than 80% this month due in large part to excitement over how it can take advantage of the hot NFT market.

And Playboy certainly has unique offerings. “Look, we have an unbelievable archive, 68 years. It is the 5,000 pieces of art we have, it’s covers, it’s photography. It is so deep and rich in what’s in there,” CEO Ben Kohn said on the company’s earnings call last month.

Playboy, which went private in 2011 amid declining ad sales from its eponymous nude magazine, rejoined the public markets in February with a management laser-focused on modernizing a company once known for its leading market share of pubescent closets.

Yeah, I did not see that one coming. But I kind of saw this one coming – the Jim Hamilton blog recently flagged a petition for proposed rulemaking calling for the SEC to clarify the status of NFTs & NFT platforms under the federal securities laws. The petition was submitted by Arkonis Capital, and is a pretty sophisticated piece of work. If you’re working in this area, it’s definitely worth reading.

NFTs: Your Wu-Tang Clan Update

Since they’ve never been ones to sleep on a trend, I’m sure it will come as no surprise to regular readers of this blog that America’s most entrepreneurial hip-hop artists have already launched their own NFTs. This article from The Observer has the details on the Wu-Tang Clan’s move into the world of non-fungible tokens:

Within the music and recording industry, gimmicks are essential to keeping the wheel of capital and cultural production churning. In other words, gimmicks are nothing to be ashamed about because they tend to be extremely effective: back in March of 2014, the legendary rappers of the Wu-Tang Clan announced that they’d only be selling a single copy of their forthcoming album, Once Upon a Time in Shaolin.

The album eventually sold for around $2 million to the notorious “pharma bro” Martin Shkreli, but the stunt had proven that novel ways of selling music were still to be discovered. Now, that new frontier has arrived: recently, the Wu-Tang Clan announced that they’d be selling 36 copies of a 400 page coffee table book about their legacy in the form of NFTs, or non-fungible tokens.

Before you decide to turn to Ghostface Killah or RZA for investment advice, I would caution you that not all of their business ventures turn out to be as lucrative as Once Upon a Time in Shaolin.  As for me, I’ve learned my lesson from Playboy & have given up on conventional investment strategies. I’m cashing in my 401(k) and putting it all in Dogecoin.

John Jenkins