Serial SPAC sponsor Chamath Palihapitiya (Etienne Laurent / Getty Images)

Return of the SPAC

Oh my god.

7/30/24 4:02PM

It looks like one of my favorite feats of financial engineering might be mounting a comeback. From The Financial Times:

New fundraising [for SPACs] has been improving slowly this year, rising about 20 per cent over the same period of 2023 to $3.1bn, according to Dealogic, and advisers are expecting activity to pick up pace. More than 20 Spacs have filed IPO documents since the start of June, targeting a combined $4.3bn in fundraising. That compares with just $1.8bn raised in the entire second half of 2023.
“There are over 1,300 unicorns out there, and the exit route on both the IPO side and the strategic M&A side has been closed,” said Jimmy Fang, chief operating officer at Spac sponsor Explorer Acquisitions. “Even in the hottest tech IPO market ever, you’re unlikely to get more than 150 IPOs in one year. What happens to the remaining companies? . . . I’m not saying SPACs will fill the entire void there, but I certainly believe they can fill a sizable amount.”

SPACs, obviously, got overhyped in 2020 and 2021, considering that everyone from NBA champion Shaquille O’Neal to former Speaker of the House Paul Ryan launched a SPAC, and as the market grew frothier, the quality of “businesses” going public in SPAC deals deteriorated.

Electric vehicle startups with no revenue, electric scooter startups with broken business models, marijuana seller review platforms, and rare earth metal-based battery producers not expected to be cash flow-positive for six years all went public through SPACs, and, as you could guess, most didn’t perform too well in the public markets.

However, not every company that went public through a SPAC was a bad company. School bus manufacturer Blue Bird, IT infrastructure provider Vertiv, sports betting platform DraftKings, and potato chip maker Utz all went public through reverse mergers with SPACs, and they’ve fared quite well in public markets. The issue is less “SPACs” and more the quality of a company that looked to go public through a reverse merger with a SPAC.

SPACs provide an expedited IPO process with less regulatory hurdles than traditional IPOs. In 2021, the public market appetite for new listings was massive, so “good” companies had no trouble going public through an IPO, and the only companies willing to do a SPAC deal would have been those that couldn’t attract the investor interest needed to support a traditional IPO (for context, Blue Bird, DraftKings, and Vertiv all announced their deals well before the pandemic, and Utz announced its deal in June 2020, before valuations got crazy). Naturally, many of these companies had no business being public.

However, IPO markets are now frozen, many venture and private equity investors need exits to return capital to their investors, and many of their portfolio companies are either 1) worth more than $1 billion, 2) profitable, or 3) both. If the IPO market remains cold, SPACs could become an attractive alternative to get portfolio companies to the public markets.

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Luke Kawa7h

US job growth crushes estimates in March, with the unemployment rate unexpectedly dipping to 4.3%

US hiring surged in March, with job growth of 178,000 well ahead of estimates while the unemployment rate unexpectedly edged down to 4.3%.

Economists had anticipated non-farm payrolls growth of 65,000 for the month with the unemployment rate holding steady at 4.4%

Event contracts had presumed that job growth would come in between 70,000 and 80,000, a sunnier view than Wall Street.

Prediction markets had anticipated roughly 70% odds that the unemployment rate would hold steady at 4.4%, with a much higher implied likelihood of an increase versus a decrease.

(Event contracts are offered through Robinhood Derivatives, LLC — probabilities referenced or sourced from KalshiEx LLC or ForecastEx LLC.)

S&P 500 equity futures, which were modestly negative ahead of the report in thin holiday trading, were little changed in the immediate aftermath of this release. Treasury yields jumped, with the 10-year yield rising to 4.35% from 4.31%.

The inflationary impact of the higher crude prices in the wake of US-Israeli attacks on Iran and the subsequent challenges shipping oil through the Strait of Hormuz has been the dominant macroeconomic development of the past month, rather than US labor market data.

Before the conflict began, roughly 60 basis points of easing by the Federal Reserve was priced in for 2026. Heading into this release, that’s slimmed to just 5 basis points as US gas prices jumped above $4 per gallon.

The Federal Reserve’s “dot plot” from the March meeting still suggests that officials think it will be appropriate to lower the policy rate this year if the economy unfolds in line with their expectations.

The February jobs report had been a big disappointment, with jobs unexpectedly contracting and the unemployment rate edging higher. With this release, the February figures were revised to show an even larger decline of 133,000.

Strikes which had weighed on employment in health care during February, a critical source of US employment growth in recent years, seemingly reversed. The industry accounted for more than half of net job growth for March.

Tasha Matsumoto

23h

Stocks eke out gains on hopes for a path forward for reopening the Strait of Hormuz

Stocks rebounded on news that Iran is drafting a protocol with Oman to “monitor transit” through the crucial Strait of Hormuz.

Matt Phillips4/2/26

AI server cluster maker Penguin Solutions takes flight

Small-cap AI server cluster maker Penguin Solutions surged Thursday after posting better-than-expected Q2 revenue and profit numbers Wednesday after the close, along with an increase in full-year sales and profit guidance.

The company, which was known as Smart Global Holdings until July 2024, has positioned itself as a provider of “end-to-end AI infrastructure solutions.”

Its Advanced Computing division designs and sells computers, cabling, and cooling systems, the server racks and clusters of racks AI data centers need. Its other main division sells flash and DRAM memory products.

It’s a pretty small company, with a fully diluted market cap of just over $1 billion and roughly 2,900 employees, according to FactSet.

The stock is volatile. Penguin dove during last year’s tariff tantrum that followed “Liberation Day” in April. Then it turned tail and doubled through early October amid a surge of call options activity, which tends to reflect retail interest. From the October peak, it then plunged by about 50%, before Thursday’s renaissance.

For what it’s worth, call options activity in Penguin is pretty busy today, too — relatively speaking — with roughly 2,625 traded as of 1:15 p.m. ET. That’s the most since early January, when the company last reported quarterly numbers. The average volume over the previous 25 trading sessions is about 325 calls a day, FactSet data shows.

Penguin Solutions Stock Takes Off On AI Bolstered Outlook

The company, which was known as Smart Global Holdings until July 2024, has positioned itself as a provider of “end-to-end AI infrastructure solutions.”

It’s a pretty small company, with a fully diluted market cap of just over $1 billion and roughly 2,900 employees, according to FactSet.

Luke Kawa4/2/26

Momentum returns to optics stocks as the release valve for AI optimism

Potentially imminent end to the war? Buy optics stocks.

Maybe not? Buy optics stocks anyway.

Effectively all the juice left in the AI trade is coming from optics (and memory) stocks. And the latter group is taking a bit of a breather today while the former continues to surge.

Shares of Ciena Corp., Lumentum, and Coherent are building on recent big gains and among the biggest gainers in the S&P 500 near midday, while Applied Optoelectronics is also surging on Thursday.

These companies all provide solutions that help information move around in data centers, and thus are key beneficiaries of the aggressive capex plans of hyperscalers. Nvidia has invested $2 billion apiece in Coherent and Lumentum in deals that also include purchase commitments.

Matt Phillips4/2/26

Space stocks rip during a topsy-turvy day for the equity market

Satellite-services-from-space stocks surged Thursday after reports that Amazon is in talks to buy Globalstar, which provides voice and connectivity services from its satellite network. It also can’t hurt that the general mood around space is ebullient, following the successful launch of Artemis II on Thursday.

Planet Labs and ViaSat also soared on the news.

The gains for EchoStar — seen as a backdoor play at pre-IPO SpaceX exposure — and Rocket Lab were more muted, perhaps because a deep-pocketed competitor like Jeff Bezos getting serious about space services could complicate the plans of the two largest commercial space launch companies.

Rocket Lab and SpaceX see launch services as key to their aspirations of being major providers of voice and data services from low-Earth orbit satellites.

Tesla CEO Elon Musk’s SpaceX is the dominant provider of such services, and the early rumors on the company’s planned IPO — expected to be the largest ever — suggest the market is very excited about the prospects for the industry.

Elsewhere in the space stock world, Intuitive Machines — a maker of space infrastructure that provides services to NASA for lunar missions — also rose.

Globalstar surges after FT reports that Amazon is in talks to buy the satellite group

Rocket Lab and SpaceX see launch services as key to their aspirations of being major providers of voice and data services from low-Earth orbit satellites.

Elsewhere in the space stock world, Intuitive Machines — a maker of space infrastructure that provides services to NASA for lunar missions — also rose.

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