Not every SPAC is pure garbage – TechCrunch

by Joseph K. Clark

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Happy Saturday, everyone. Despite it being a short week, I feel pretty run over from the sheer news volume we’ve put up within the last few days. So let’s pause, repine and talk about SPACs as a nice little treat.

garbage

No, we’re not going through a SPAC investor presentation teardown today. Though we will dig into the Babylon Health SPAC on Monday. Instead, we’re discussing the SoFi and BarkBox blank-check deals. Both began to trade this week after announcing their public debuts some time ago. And things went just fine? Here’s CNBC on SoFi’s first minutes as a public company:

SoFi, short for Social Finance, went public by merging with Social Capital Hedosophia Corp V, a blank-check company run by venture capital investor Chamath Palihapitiya. The stock closed up more than 12% to $22.65.

That’s not only a win for SoFi, but also for the somewhat-embattled Chamath Palihapitiya, whose SPAC bets have lost some luster in recent months; of course, all SPAC-led debuts are speculative, but some retail traders appeared to index more on Palihapitiya’s reputation than fundamentals — what can you do! BarkBox also did perfectly ok when it began to trade this week after its own SPAC combination was consummated, as Barrons reported:

BARK stock (ticker: BARK) jumped about 7.5% on Wednesday to trade at around $12 in the afternoon. That gives the company a market value of close to $2.4 billion.

BarkBox stock has since given up some gains but managed to get public without falling below its initial SPAC price. That’s a win, given how market conditions have shifted since its flotation was initially announced.

Two wins in a single week are good news for SPAC-land and the myriad players on the blank-check and startup sides of the marketplace. Naturally, two solid results do not a trend make, but it seems clear that for companies with material revenues, the SPAC route is not as potholed as we might have expected.

The crypto wager

If you think SPACs are generally annoying, just wait until we fuse the blank-check boom with crypto. As we are about to do! This week Circle, a crypto-focused company with a particular taste for stablecoins, raised $440 million. That was an ocean of capital for a company best known for the USDC stable coin; it is also reported to be considering a SPAC-led IPO.

What is a stable coin? It’s a cryptocurrency that is pegged to a fiat currency. In the case of USDC, as you surmised, the cash is pegged to the US dollar. Stablecoins are good fiat comps inside the crypto world and have proven to be hugely popular.

Circle’s USDC has $22.8 billion worth of supply in circulation, it claims, and several billion in daily transactions, per CoinMarketCap data. That’s not bad! But what isn’t as clear to your humble servant is precisely how the firm generates huge revenues at super-attractive gross margins. This is what we’d expect from a company that just locked down nearly a half-billion dollars (or USDC, we suppose) in private capital in a single go. So, for once, bring on the SPAC. Because we want to see the damn numbers, and quickly, given our sheer curiosity.

Growth?

Wrapping, Ron and I got to dig into several public companies’ earnings reports the other day, essentially discovering that the vaunted digital transformation acceleration is actually coming true for some companies.

This week’s news continued the argument. Zoom’s earnings, for example, backed up our thesis. Its revenues were up 191% in Q1 F2022 compared to Q1 F2021. That’s just bonkers good.

On the other end of the spectrum are Dropbox and Box, which are under fresh pressure this week from external investors. The pair of former private-market darlings have run into a growth wall and are taking incoming fire due to it. Grow or die is more than just startup advice. It’s what software companies need to do if they want to stay in charge of their own destiny.

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