Thread by @fdestin

1/ Are SPACs bad?

Step one : differentiate between "broker SPACs" (people trying to grab fees, shift risk and leave the building) and "sustainable SPACs" ( significant sponsor commits, are looking to build real businesses, stay in)

2/ Step two: check whether the net proceeds to the company are sufficient. Achilles heel of SPACs is uncertainty on redemptions.

You can possibly mitigate this like CAZOO did: $1BN SPAC on the side 🔥. That'd protected proceeds right there.

3/ Step three: manage your liquidity. Post IPO your float may be super thin as PIPE's investors are locked in and only the non-redeemed portion of the SPAC is trading.

This can stay with you for a long time and lead to volatility, market manipulation issues, depressed pricing.

4/ Step four: manage your overhang. If you've got weak investors in the PIPE and existing investors eager to sell, you're in trouble!

5/ Lessons from CAZOO:
- Strong sponsor with a significant commit and long term outlook (here AJAX, probs best SPAC Sponsor out there)
- Existing investors committed to a significant PIPE (here D1 Capital Partners AAAND the AJAX sponsors)
- Protect your proceeds and build LT

6/ There's no silver bullet.

You still need a long time to gradually increase your float, balance your investor base, build confidence with the markets etc.

This is why IPOs are not really exits but financing milestones.

7/ Ugh minor correction: CAZOO PIPE was $800M, total proceeds to the company $1BN.