[HN Gopher] Goldman Sachs shrinking its SPAC business amid regul... ___________________________________________________________________ Goldman Sachs shrinking its SPAC business amid regulatory crackdown Author : prostoalex Score : 120 points Date : 2022-05-10 15:37 UTC (7 hours ago) (HTM) web link (www.cnbc.com) (TXT) w3m dump (www.cnbc.com) | PedroBatista wrote: | Looks like Goldman Sachs got a call telling them the SEC police | was coming and got out of the party in a hurry ( and what a party | it has been.. ) | | Only retail investors ( aka suckers ) will be holding the | bag/beer, as always. | | I'm curious to know if Goldman Sachs already has an alternative | scheme/scam running or it's a case of "chilling out for awhile". | MomoXenosaga wrote: | Has anyone from Goldman ever actually been in trouble from the | authorities? | | That was my take from the 2008 financial crisis: the government | had to fix everything. Again. And no Hollywood movie about the | European, American and Asian finance ministers who had to make | sure the ATMs kept working. | FabHK wrote: | Fabrice "Fabulous Fab" Tourre was basically Goldman's fall | guy. Reasonably junior (in investment banking, VP is junior - | analyst, associate, VP, director, MD) who had sent some | stupid emails to his girlfriend ("The whole building is about | to collapse anytime now. Only potential survivor, the | fabulous Fab ... standing in the middle of all these complex, | highly leveraged, exotic trades he created without | necessarily understanding all of the implications of those | monstruosities!!!"). | | He was charged, but nobody else from GS, AFAIK. | | https://www.usatoday.com/story/money/business/2013/08/01/gol. | .. | | (I remember because he besmirched my good name :-) | odiroot wrote: | Yes Tim Leissner but nothing related to 2008: https://en.wiki | pedia.org/wiki/1Malaysia_Development_Berhad_s... | rchaud wrote: | Roger Ng was found guilty by a US court of conspiring to loot | Malaysia's 1MDB fund: | | https://www.npr.org/2022/04/08/1091801453/1mdb-fund- | goldman-... | hackernewds wrote: | One need only look at the nickel commodities market to | understand that Goldman socks measures these things in terms | of expected value, where if the benefit exceeds the EXPECTED | VALUE (probability*fine) of the fines, they will have an | active desk for it. | | https://www.cftc.gov/PressRoom/PressReleases/7505-16 | pavlov wrote: | There's always crypto... | | However the SEC recently increased its "Crypto Assets and Cyber | Unit" staff from 30 to 50. Hopefully they'll bring the hammer | down on token offerings with enough force to scare the big VCs | away, at least. | gowld wrote: | 50people vs $billions in scams. | rchaud wrote: | You never know, those 50 people could have 50 discord | channels cultivating an amazing community (of informants). | aussiegreenie wrote: | Goldman will be on the 'other side', that is, shorting the | existing SPAC companies knowing that theu are overpriced. | chrisgd wrote: | The SEC has been saying for months they were taking a harder | look here. Just reading the writing on the wall. All the | companies that have gone public via SPAC have not done well, | not sure who would go public that way - I imagine no one will | be holding the bag because most will give the money back and go | away | rchaud wrote: | If you have your ducks in a row as a business, you don't have | to go public via SPAC. | atlasunshrugged wrote: | I'll admit I have some recency bias here as I just re-read The | Big Short about the '08 financial crash but I think you're | probably right on the first point, they got a tip or heard | around the proverbial finance industry watercooler that a | crackdown was coming and decided to exit. I'm 100% certain | they've got something else in the works, probably more opaque | for regulators and the public with less risk to Goldman and a | higher profit margin if history is to be believed. | chowells wrote: | It's not a big secret that the SEC doesn't like SPACs. They | make these things really clear before they start taking | action. They specifically have an issue with the fact that | the prospectus for a de-SPAC merger isn't (yet) subject to | all the same reporting rules as an S-1 filing. | | When companies have to present their financials coldly | instead of painting the nice warm dream, it's gonna deflate | the market. Between that and the other factors hitting the | market now (interest rates and inflation), there just isn't | going to be a huge amount of work in the space in the future. | | You really don't need to assume a conspiracy of some sort is | involved when all the completely public factors justify this. | jessaustin wrote: | This not-big secret is also a not-new secret. These aspects | of SPACs have been apparent since the invention of SPACs. | What completely public factor accounts for the change in | Goldman's policy ? | | You really don't have to cape up for Goldman. They don't | care what we think. They always have enough alumni in the | government that they don't _have_ to care. [0] The Biden | administration is theoretically less infested with them | than previous ones, but e.g. SEC Chair Gary Gensler and | Examiner Adam Storch are both former Goldman people. There | are probably more but I figured one minute on DDG was | enough... | | [0] https://www.nytimes.com/2017/03/16/business/dealbook/go | ldman... | chowells wrote: | Why is it so important to you that a conspiracy must | exist? What pushed you to ignore evidence so hard that | you appear to think that a question I'd already answered | is some giant gotcha? (What's different now? The market | has cooled massively for other reasons.) | | If you look at the new rules the SEC announced, they're | so poorly written that no bank would see them as more | than an accounting checkbox. Those rules are certainly | not the reason for winding down a line of business. | | If you want to attack connections between finance and the | government, why not focus on real ones? Like, why are the | new SEC policies so toothless? Who wrote them, and why? | | It could easily be someone from GS, even! But people are | a lot more likely to listen to you if you save your | criticism for things that are based on facts and clear | reasoning. A massive web of innuendo is worth a lot less | than one direct problem. | Adraghast wrote: | That tip would be the nearly 400 pages of proposed | regulations the SEC dropped in March: | | https://www.sec.gov/rules/proposed/2022/33-11048.pdf | mqus wrote: | TIL: SPAC - Special-Purpose Acquisition Company -> | https://en.wikipedia.org/wiki/Special-purpose_acquisition_co... | 3np wrote: | Thanks. Thought it was short for Super PAC | (https://www.fec.gov/help-candidates-and-committees/filing- | pa...) first and found the whole thing confounding. | eatonphil wrote: | I recommend following Matt Levine's free Money Stuff column if | you're into this. | | https://www.bloomberg.com/opinion/authors/ARbTQlRLRjE/matthe... | FabHK wrote: | Seconded. Matt Levine's column is informed, informative, | witty, and entertaining. | bozhark wrote: | I recommend not. | CyanBird wrote: | If you don't then you might have a better source for | reviewing the day to day of the banking/finance landscape? | calmoo wrote: | Why not? | xoz wrote: | Matt Levine, much like most journalists, does not create | any of the content, he just writes about it. E.g. | etcetera the stories he tells are usually of 3rd parties | (like what's happening in financial markets). | | Would be much more interesting if he had personally | experienced or orchestrated what he discusses. Otherwise | you may as well just listen to anyone. | | EDIT: As some people are responding and confused about | how journalism works: E.g. he wrote about Elon Musk today | yet is just getting his information from other articles | or Twitter as I doubt he is speaking with Elon Musk or | involved in the deal. At that point it's just hearsay. | chowells wrote: | > Would be much more interesting if he had personally | experienced or orchestrated what he discusses. | | Like if he had worked at Goldman-Sachs and had direct | experience with how large financial institutions function | or something? | xoz wrote: | In the past, yes, but I mean what he writes about now. | E.g. he wrote about Elon Musk today yet is just getting | his information from other articles or Twitter. At that | point it's just hearsay. | bumby wrote: | So say a science writer reviews peer-reviewed literature | to write about some technology or technological claim | (let's say CRISPR) but has done none of that direct | research themselves...are you saying they are just | writing hearsay? | | Now maybe you can qualm about where he gets his | information and how reputable it is, but I think your | standard for journalism differs from most. | JumpCrisscross wrote: | > _it 's just hearsay_ | | He has been offering analysis and commentary on the | process since the beginning, floating theories for | various parties' positions and debunking silly ideas that | were being taken seriously at the time. | alpha_squared wrote: | That's not a prerequisite to journalism, though I guess | that can be _your_ standard for it. Musk is notoriously | media-hostile, which means it 's often very difficult to | get direct quotes or responses from him on a story that | doesn't try to flatter him. By your standard, that'd mean | Musk has unilateral ability to discredit journalism by | just not participating. | newsclues wrote: | Do you have any personal experience in this, or are you | just anyone writing rubbish? | mywittyname wrote: | No offense, but this is silly. The whole purpose of | journalism is to report what is happening to other | people. | | Writing about your first hand accounts is not journalism. | If for no other reason than it would be inherently | biased. We have a term for stories from a person's life | written by the person: autobiographies. | eropple wrote: | The BBC puts someone on the ground in Kyiv while it's | being shelled. They write about what they see and learn | while there--and you don't think that's journalism? | | To be clear, the criticism of Levine from the GP is total | bunk, but this definition is weird. | gowld wrote: | Huh? writing about someone you see is journalism. | roflyear wrote: | Gonzo journalism maybe | colinmhayes wrote: | Well good thing he's not a journalist. He writes a | comedic opinion column that pulls from his experience as | an investment banker and M&A lawyer. He's a blogger. | rpgbr wrote: | > Matt Levine, much like most journalists, does not | create any of the content, he just writes about it. | | You just literally described a journalist's job. | Congrats? | bonecrusher2102 wrote: | Here's the best source I've ever read explaining the SPAC model | and it's pitfalls. | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3720919 | | And the discussion on HN: | https://news.ycombinator.com/item?id=26037059 | spxdcz wrote: | Related: I wrote some code that attempts to extract the latest | SPAC data (which you can filter/export) from SEC filings as | they're filed: https://docoh.com/spacs | SheinhardtWigCo wrote: | John Tuld: Let me tell you something, Mr. Sullivan. Do you care | to know why I'm in this chair with you all? I mean, why I earn | the big bucks. | | Peter Sullivan: Yes. | | John Tuld: I'm here for one reason and one reason alone. I'm here | to guess what the music might do a week, a month, a year from | now. That's it. Nothing more. And standing here tonight, I'm | afraid that I don't hear - a - thing. Just... silence. | | https://youtube.com/watch?v=K05sxfa4zdM | toomuchtodo wrote: | Both a great lens into part of the GFC and a spectacular | cinematic piece. Tremendous scene. | HWR_14 wrote: | The part that bothered me is that, as I recall, there was no | actual margin call in the movie. I guess it all was done in | advance of a margin call? I don't recall exactly. | | Great movie though | awad wrote: | The plot centers around the possibility of going bankrupt | given the high amount of leverage being used on volatile | mortgage securities that were starting to fail IIRC. The | scheme they cook up to offload their as much of their | position as possible the next morning. | wozer wrote: | Do large institutional investors even get margin calls? I | thought this only happens to customers of brokers. | SkipperCat wrote: | It pretty much happened to Knight Trading. They turned on | a dev trading algo and wound up acquiring a massive | amount of positions (and thus risk). Their clearing firm | forced them to close all those positions and the cost of | crossing the bid-ask spread wiped them out. | | Never read the book | (http://www.knightmareonwallstreet.com/) but watched it | happen in real time from the trade desk at a different | firm. | | You could also say it happens to small banks. If you fail | some sort of FDIC testing, you're classified as at-risk | and they force you to sell to a larger bank so as not to | risk depositor funds. | gowld wrote: | Anyone who borrows a lot and has unrealized losses can | get margin called. | chollida1 wrote: | https://www.bnnbloomberg.ca/goldman-u-turn-on-hwang-put- | bank... | | You bet they do. But like all things the more money you | have the better you get treated. | | Small retail investor, your margin call is likely | automatic with assets sold without your input to take the | money. | | large hedge fund. Tables of lawyers deciding how much you | have to put up, at what time, and what can you move out | of that bank before you pay. | SkipperCat wrote: | By dumping all their portfolio, they avoided the margin | call which would have destroyed the company. Their early | and bold actions saved the firm. Sadly for the folks on the | other end of the trades, it probably crushed them. | | Margin call is by far the best movie about the financial | crisis of 2008 that I've ever seen. I was working in the | biz at that time and it all just rang so true. 7 AM pre- | market meetings, lots of folks crunching data, Wall Street | people actually living in Brooklyn and so much more. | | Sadly, the movie is so esoteric that it never had a | mainstream success. Such a shame because it had great | actors and a fantastic script. | ericmay wrote: | I agree. Margin Call and The Big Short (the book is sooo good | even if you've seen the movie!) are the best two movies that | came out of that entire debacle. That scene was enjoyable. | They really nailed the casting and conversations. | jstx1 wrote: | Yes, the person who was just briefed on what was happening, and | in very simple terms because he doesn't understand the | technical language of complex financial instruments - that's | the person who's guessing what "the music" is going to do? | | That whole movie is so shallow when you think about it for more | than 2 seconds. | dilyevsky wrote: | I think you're assuming a little too much about what Irons | character does/doesn't know about the overall state of | financial system. He may had other analysts/industry insiders | briefing him on various things for months by that point. | jstx1 wrote: | > He may had other analysts/industry insiders briefing him | on various things for months by that point. | | That's you assuming stuff, not me. And I don't think | there's any evidence for it in the movie - it's portrayed | as a surprise to everyone involved. | dilyevsky wrote: | I wasn't the one making the original claim bc sorkin | didn't include 10 mins of exposition explaining the ceo's | logic there which btw is completely irrelevant to the | theme of this movie. | | Edit: actually wasn't Sorkin but whatever | paxys wrote: | You have to watch it a bit closer. He didn't ask for the | problem to be explained in simple terms because he didn't | understand what was going on. Instead he wanted to make sure | his subordinates understood the problem and didn't try to | hide their ignorance behind needless complexity. This is a | strategy used by all of the most effective managers in the | real world ("pretend that I'm stupid", "explain it to me like | I'm five"). It was clear from the get go that he was the | smartest person in the room in every scene he was in. | | The movie also makes clear multiple times that the only | people who were surprised by what was going on were the | little guys - risk analysts and middle management. People at | the top got the news and were simply like "ok guess it's | finally happening". | | If you ask around people who do this stuff for a living, all | of them will tell you that out of the dozens of movies about | the financial crisis, Margin Call was conceptually the | closest one to how things actually work in the industry | (obviously disregarding the Hollywood-esque dialog and | characters). | jstx1 wrote: | The portrayal of that character didn't work for me. I just | didn't find him plausible as a high-level finance | executive. It's like a portrayal of a CEO for people who | have never interacted with such a person in their life. If | that character works for you, then it makes sense that you | can interpret things in a more generous way. | dilyevsky wrote: | You haven't interacted with a lot of ceos outside of tech | then. I'd say irons and especially bettany's low level | desk director portrayals are exactly spot on. In some way | toned down even | paxys wrote: | That's funny because he is literally based on two real | people - Richard Fuld and John Thain (who were CEOs of | Lehman Brothers and Merrill Lynch respectively at the | time of the crisis). | jessaustin wrote: | I _thought_ the name "Tuld" might have had a meaning I | was missing... | shrimp_emoji wrote: | I pray Jerusalem -- that the entire world -- can afford the... | rarity... of a perfect knight. | daniel-cussen wrote: | What does that mean? | evan_ wrote: | It's a quote from the 2006 film "Kingdom of Heaven". I | choose to interpret it as a comment on the pointlessness of | posting a line of dialog from a movie as a response to an | ongoing news story with no other commentary. | chrisgd wrote: | I think an even better quote for this situation is the one | where the same character says "there are 3 ways to make money - | be first, be smarter, or cheat. And the easiest is always to be | first." | joshocar wrote: | I was literally just talking to a SPAC CEO last weekend that was | in a deal with Goldman that got dropped by them. Apparently, | there are regulations coming down from the SEC and Goldman didn't | want to deal with them and/or the regulations changed the profit | calculus. | vmception wrote: | Can someone explain Goldman's role? What are they underwriting? | SPAC's merge with companies with capital that SPAC's already | have collected. Was Goldman underwriting the formation of new | SPACs when those SPACs are initially collecting money? | JumpCrisscross wrote: | > _Was Goldman underwriting the formation of new SPACs when | those SPACs are initially collecting money?_ | | SPACs are chock full of fees to Wall Street. | | When the SPAC goes public, it pays an IPO fee. The bank, | having to comply with fewer regulations than in a traditional | IPO, makes a healthy profit. When the SPAC negotiates a | merger it pays M&A fees. When shareholders are presented with | the merger and asked to vote _that_ comes with a fee. If | there is a PIPE, there are, of course, more fees. | | Later, when the sponsors sell their stock, there will be | brokerage fees for the block trade. And I assume, in the | final stage of a SPAC's lifecycle, there will be de-listing, | liquidation and/or distressed debt fees. | darawk wrote: | This suggests a new line of business for SPACs: SPAC SPACs. | A SPAC who's only purpose is to acquire and then spin out | new SPACs. | exogenousdata wrote: | Sadly too late. It's called a SPARC. Huzzah! | | https://www.forbes.com/sites/jacobwolinsky/2021/12/16/ode | ys-... | vmception wrote: | could sell shares of the management company that the | sponsors come from | vmception wrote: | > And I assume, in the final stage of a SPAC's lifecycle, | there will be de-listing, liquidation and/or distressed | debt fees. | | lol, are these target companies saddled with debt though? I | don't think so | BbzzbB wrote: | Given the cash burn of the classic 2021 SPAC, if they're | not riddled with debt yet they may well be as soon as the | stock market ATM stops spitting money (which might be | about now). | | Which reminds me OP omitted dilution/share issuance as a | mechanism for banker fees. | chrisgd wrote: | Underwriting fees on SPACs are less than traditional IPO as | it is easier to get done. | JumpCrisscross wrote: | > _Underwriting fees on SPACs are less than traditional | IPO as it is easier to get done_ | | True, but the margins are wider. Most of the documents | are boiler plate. The same investors were buying them in | comparable chunks from deal to deal. All this before the | boatload of the other fees I mentioned. | bradwood wrote: | SPACs themselves need to float before they can make an | acquisition. The investment bank provides the primary markets | support for this, sets up a syndicate, and markets the spac | to the institutional investor community. | | There may be a level of underwriting going on also, as is the | case with a rights issue or IPO, but it's probably more the | marketing and access to the bank's client base that the spac | benefits from. | matt_s wrote: | I suspect that similar to how the "market" has various things | "priced in", larger financial firms want to stay ahead of | regulation and essentially change their business models around | ahead of regulations. | | I think they all operate on the principle of being first for | everything is more profitable, including exiting poor | investments. | ericmay wrote: | The best way to think of "priced in" when you are reading | something that someone else wrote is to replace those two | words with "I don't know". Nothing is priced in. Everything | is priced in. When someone thinks of an idea, by virtue of | sharing that idea it's deemed to be "priced in". | totoglazer wrote: | No, that's kind of nonsense. | ericmay wrote: | It's really not. "It's priced in" is just religion at | this point and it's really just surface level useless | banter. The market is random and softly guided by | macroeconomic forces. Interest rates go up and then the | share price of Google goes up? Priced in. They go down | and the share price goes up? Priced in. Company has a bad | quarterly? Already pride in by the nefarious "market". | Etc. Recognizing things like that is a good first step | toward having a coherent investment thesis. | aaaaaaaaata wrote: | > Priced in | | By the time you are talking about, it largely will be. | costcofries wrote: | All I can think when I hear SPAC is Chamath and well, he should | at this point be below everyones line. | strikelaserclaw wrote: | people should stop idolizing others just because they are | wealthy, some of these guys are straight up gordon gekko type | sociopaths | tssva wrote: | Unfortunately that is exactly why many people idolize them. | paxys wrote: | 1. Get lucky backing the right companies during the biggest | tech bull market in history and get very rich | | 2. Build a Twitter following and preach on topics on which you | have zero knowledge or experience | | 3. People will believe you because you are rich (like they want | to be) and so you must obviously be a genius | | 4. Use that influence to push your political views and/or other | hustles like your favorite cryptocurrency, NFTs, SPACs) | | The standard VC playbook these days ___________________________________________________________________ (page generated 2022-05-10 23:00 UTC)