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What Could SPACs Learn from Crypto?

CryptocurrencyApr 13, 2021 05:30AM ET
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What Could SPACs Learn from Crypto?

  • Bill Gates commented that most of SPACs are going public too early
  • Special Purpose Acquisition Companies (SPACs) allow attracting investors without the IPO process
  • For now, most of SPACs seem unreliable, but they are permitted to disclose forecasts to potential investors. That’s why they are more attractive for potential investors
  • Cryptos were in a similar situation before they advanced transparency models and gained public trust

Despite quite a long lifespan, cryptocurrencies still remain a subject of concern for some people. Due to their decentralized nature and distributed ledger technology, mass opinions vary. But what do they stand against? The stock markets.

At the beginning of April, the Microsoft Corporation (NASDAQ:MSFT) founder, Bill Gates, commented on the recent boom of SPACs. During his interview with CNBC journalists, he claimed that we flipped from the world where companies stayed private too long to the opposite situation, when some companies may be going public too soon.

Also, he mentioned that there would be both high-quality and low-quality SPAC companies with this approach. So the investors should decide themselves “what is what” and “which is which.” Of course, this will bring more confusion to beginners in this field.

What is a SPAC?

SPACs or Special Purpose Acquisition Companies are a new wave in the market. They offer private businesses a fast track to go in public, circumventing the IPO process. This literally means investors can get into the company almost right after it launches. Opinions on this new approach differ from positive to negative.

On the one hand, critics claim that investors are getting into companies and getting burnt immediately without the IPO process. They have very little time to figure out if it’s a legitimate company. Most of that companies even don’t have the end-product, but they already opened stock trades.

For instance, Nikola, a company providing zero-emission vehicles, experienced a temporary loss after Hindenburg Research accused the company of fraud due to inaccurate allegations in the report.

On the Flipside

  • People protect SPACs because they are able to reveal the qualitative picture to potential investors

Not all of the specialists and analytics are sceptical about SPACs. Chamath Palihapitiya, a former Facebook Inc (NASDAQ:FB). executive, expressed optimistic predictions for them. In short, they use a regulatory loophole that allows them to disclose forecasts to potential investors. This explains why more and more people are taking them on board and investing in.

What About Crypto?

Cryptocurrencies have come a long way from the unknown to the asset invested by Elon Musk himself. For Bitcoin, it took less than ten years to break mass unacceptance and prove its reliability. However, it was a pioneer of blockchain technology.

The newest debutants in the market make a breakthrough easier and faster. This happens due to crypto popularisation as well as the improvement of the crypto bull market. Consider the latest Cardano’s price rise that occurred several months ago.

There were several reasons for that. In general, Cardano’s successful moves were compiled in a winning gambit. Improving their protocol transparency model and its Coinbase pro listing spurred a bullish process. Moreover, with this move, the coin jumped in the NFT hype train as well.

The things to Learn for SPACs

The value of a coin is based on the scale of community involvement, which includes user demand, scarcity or asset’s utility, etc. The main idea is the more people believe in it and invest in, the more price rise.

In the beginning, cryptos were in a similar position as SPACs are now: quite ambitious ideas with the lack of public trust. On the other side, constant advancements and the improving process led them to high competence and confident investments.

Bill Gates may be right: SPACs are a rough idea in the current form. However, the more people are interested in enhancement, the more transparency, and clear vision will be implemented.

This rule relates to businesses in general: the real value is over empty promises.

We flipped from the world where companies stayed private too long to the opposite, when some companies may be going public too soon. Bill Gates

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What Could SPACs Learn from Crypto?
 

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