Cowen's Co-President on Why SPACs Are Having Such a Moment

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:17)

And I'm Tracy Alloway.

Joe Weisenthal (0:19)

Tracy, 2020 will obviously be remembered for a lot of things, no doubt. You know, after the pandemic, the all of the political stuff that we saw, the extraordinary sort of year in economics and the stock market and everything, somewhere down the list, maybe like down like 50 or 70 or 90th in terms of like the things that people look back on, I would say is kind of the year of the SPAC.

Tracy Alloway (0:52)

Yeah, certainly, definitely if you're in capital markets, it's the year of the SPAC. And I think I'm trying to remember the latest numbers, but I think it was something like $60 billion raised in 2020, which was more than the previous 10 years combined.

Joe Weisenthal (1:10)

Yeah.

Tracy Alloway (1:11)

Something like that.

Joe Weisenthal (1:12)

Right, so we've just seen this extraordinary surge for people who don't know, it's like these vehicles where people buy into an IPO and then the company has some certain amount of time to then go out and actually acquire a company, bring it public subject to the approval of the people who bought into the IPO.

We've seen a lot in the electric vehicle space, we've seen a lot in other technology, other areas, but just generally in A, it exploded and B, once like many things in 2020, not the type of thing we expected to see in the first half of the year. I think like thinking back to March, April, May, we would not expect it to be such an extraordinary year in capital markets.

Tracy Alloway (1:57)

Right, and I think one of the reasons that specs tend to draw a lot of attention is that most people or a lot of people associate them with these sort of like pre-2008 financial crisis excesses.

So there's this idea that there's so much money sloshing around in the system, people are sort of desperate to put it to work. So they'll just stick it into a blank check company, not knowing what that company is eventually going to be and just sort of hoping that their money will get deployed in one way or another. So I think a lot of people look at it as another example of froth in the market. But again, as we discussed on a previous episode with someone who was actually running a SPAC, there's also an argument that this makes sense. This structure makes sense for a lot of companies in the market.

Joe Weisenthal (2:49)

Yes, I think that's right. For a lot of companies, it makes sense. And I think that's also a part of the change, which is that not only were I would say where SPACs may be associated with speculative excess, I think they were associated too with shady companies. That it's like, okay, if you had a asset, if you had a company that couldn't do the typical IPO route, couldn't really withstand scrutiny, maybe you try to take it public via SPAC. And I think it was sort of like the...

They didn't leave a good flavor or taste in people's mouth.

And I think that's changed. And I think that one of the things that we saw this year is more seeming higher quality assets came public that way, more investors and banks with sort of a reputable or strong reputations willing to or eager to use this type of financing capital markets vehicle for this. And so maybe they're shedding some of their previous reputation, which was sort of not that great.

Tracy Alloway (3:50)

Shedding the SPAC stigma.

Joe Weisenthal (3:53)

Shedding the SPAC, that's well put, shedding the SPAC stigma. I mean, we'll see, I mean, who knows? Maybe in 2025, we'll look back at the class of 2020 SPACs and they'll all have flopped. There have been some flops. I mean, like, you know, obviously not flops, but, you know, controversies. Nikola was a very popular SPAC that surged to the moon for a while. And then all kinds of questions arose about its business and its CEO left. So there are still like lots of questions about the types of companies coming public this way, but it's certainly a, it does not seem to be going away anytime soon, which means we need to learn more about, learn more about them.

Tracy Alloway (4:32)

Yeah, I agree.

Joe Weisenthal (4:34)

So we're going to talk about SPACs. We're also just going to be talking about the extraordinary moment for capital markets in general.

I'm very excited about today's guest. We're going to be speaking with Larry Wieseneck. He is, for the last three years, he's been the co-president at Cowen and Company and has a long career doing global capital markets at Lehman, Barclays, and so forth. And so, I'm going to get the lay of the land from Larry. So, Larry, thank you very much for joining us.