Shun the Grifters
Don't let them pretend they did nothing wrong.
Officially, SPAC stands for Special-Purpose Acquisition Company. In reality, SPAC means Stimulus & Paycheck Acquisition Challenge. When, as a response to the COVID-19 pandemic, the US government started sending people who were stuck at home checks, the grifters saw a once-in-a-lifetime opportunity. Americans had money that they desperately needed to be separated from. SPACs were one of the solutions the grifters came up with.
What SPACs allowed unscrupulous financiers to do was promise mom & pop investors the moon. Normally, when a company goes public (allows its shares to be traded by everyone), it can only present its actual financial results to investors - how much money it has made in the last few years. SPACs allowed companies to present future financial results. Companies made presentations that said - don’t worry about how much money we make today, but 5 years from now we will make BILLIONS. A lot of individual investors got suckered into the deals, bought shares in the SPAC deals and then found out a year later that they bought shares of nothing-burger companies, companies that have never made any money, and likely never will. A lot of money was lost.
Meet Chamath Palihapitiya.
Chamath leapt at the opportunity with such ravenous hunger as to be dubbed SPAC King. He took 4 companies public through SPACs:
Here’s an example of a slide used in a presentation that Chamath & Co used to sell Virgin Galactic stock:
EBITDA is something like a profitability metric. The promoters of the stock made it seem like the company was just on the cusp of being financially sustainable. Looking back, the projection didn’t age too well. The company’s EBITDA for 2021 was negative $273M, and it’s not looking better in 2022. My personal opinion is that there’s no way in hell that anyone involved in the deal actually believed that EBITDA would be positive in 2021, but SPACs allowed them to claim that it would. I encourage you to look at the whole presentation to see just how aspirationally sleazy it is.
Fast forward to May 2022, the investors who bought the shares that Chamath & Co sold them have cumulatively lost nine and a half billion dollars1. Let that sink in for a moment. Nine and a half billion dollars can buy any of the following:
Over 300,000 new cars.
Over 450,000 years of tuition in state colleges.
Over 2 million lives saved through the most effective charities as determined by GiveWell.
Meanwhile, Chamath and his friends made out like bandits on all of these deals. They didn’t make nearly as much as ordinary Americans lost, but they made a lot of money peddling impossible dreams to individual investors.
And you know what? I was willing to look the other way. I didn’t participate in any SPACs either as a buyer or a seller. I am working on something I think matters a lot, why should I spend my time on the grifters? But then a friend sent me this clip:
Chamath laughs about his SPACs. Apparently, making Americans lose a boatload of money to make an extra buck yourself that you absolutely do not need is funny.
This made me sick.
I haven’t seen such a sociopathic smile since Vladimir Putin went on Larry King and smiled as he described the death of 118 men:
And then, a few days later, I heard about the All In Summit - an event that Chamath and his co-podcasters just hosted in Miami. Speakers included:
Bill Gurley, one of the most famous VCs ever.
Palmer Luckey, founder of Oculus and Anduril.
Tim Urban of Wait But Why fame.
And many others. Tickets were $7,500 a pop and people were lining up to pay.
Now, this really rubbed me the wrong way. I think that we as a culture are currently struggling with appropriately punishing bad behavior. One the one side there’s cancel culture, where you make one offensive joke and you are unemployable forever. On the other, apparently running any kind of grift is allowed. I strongly believe that our response should be proportional to the offense.
If somebody makes a joke you don’t like or find offensive - don’t laugh.
If somebody breaks the law - prosecute them to the extent of the law, no matter who they are.
If somebody runs a grift that hurts numerous working families - shun them. Don’t show up to their party. Don’t speak at their event. Don’t lend them your credibility.
As the era of Fed-printed EZ-money is coming to an end, many grifts will be uncovered for what they are. I am The Griftologist, and I will not let the grifters pretend like they’ve done nothing wrong. Crypto scam artists; their celebrity shills; meme stock salesmen; private equity bandits; greedy politicians; unscrupulous pharma executives - all of the grifts of the last decade will be documented here.
Writing this will be hard work that will not make me popular at dinner parties, so I would appreciate your encouragement. If you think we should hold the grifters accountable - please subscribe or share this post.
That’s the total amount of market cap lost since before the SPAC mergers. No way to tell how much retail investors actually lost, but the number is likely to be in the billions.