🍋 SPAC-tacular Implosion

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Good Morning! Bed Bath & Beyond is still limping along - the company wants to close stores, cut headcount, and go ‘back-to-the-basics’ to avoid bankruptcy. And a new filing found FTX’s investors included New England Patriots owner Robert Kraft and hedge fund billionaire Paul Tudor Jones.

Jerome Powell said the Fed might have to make some unpopular decisions to stabilize prices. This week’s New York Fed survey found that short-term inflation expectations are at their lowest levels since 2021.

And a new report found that a net-zero world could be worth its weight in greenbacks and generate a projected $10.3 trillion of capital by 2050.

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1. Story of the Day: SPAC-tacular Implosion

SPAC creators have been on a wild ride lately, and it seems the party may finally be over. The bubble has burst for special-purpose acquisition companies, with a deluge of liquidations and investors getting their money back due to a lack of viable deals and the looming threat of a surprise tax bill. Over 70 SPACs have been liquidated since December alone, which is more than the total number of SPAC liquidations in history.

A SPAC is like a superhero sidekick, formed to raise capital through an initial public offering (IPO) and then swoop in to save the day by acquiring an existing private company. Unlike traditional IPOs, SPACs bypass the traditional regulatory and financial requirements, allowing private companies to go public without the hassle. They're also known as "blank check companies" because they're like a blank canvas, ready to become whatever they need to be in order to save the day and acquire an existing company.

Creators of these blank check companies have collectively lost over a billion dollars this year, with the majority of those losses happening in the last month alone. Some early birds made a killing, while the latecomers are finding it harder to close deals as stock prices drop and interest rates rise.

With the new federal tax on share repurchases, it seems SPACs are getting liquidated faster than a drink at happy hour. Experts are predicting losses of over $2 billion in the coming months, and it's not hard to see why - the average valuation of startups merging with SPACs has dropped from a cool $2 billion to a measly $400 million during Q4.

But don't worry, there are still plenty of SPACs out there looking for a merger partner - nearly 400 holding around $100 billion and 150 more holding around $25 billion that have reached merger agreements but have not closed them.

Takeaway: SPACs promised to revolutionize the way companies raise money and go public. But it turns out they're just a fleeting fad, lacking the staying power to efficiently raise money or take companies public. Investors raced to cash out before the start of 2023, and it’s tough to tell whether they’ll be back.

2. Markets Rundown

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Stocks closed higher as investors await the new inflation report.

Movers & Shakers

• (+) Oak Street Health ($OSH) +27% because of reports CVS wants to take the company private for $10 billion.

• (+) Coinbase ($COIN) +13% after the company announced layoffs.

• (–) Virgin Orbit ($VORB) -14% after the company's UK satellite launch failed.

Private Dealmaking

• Microsoft in talks to invest roughly $10 billion in ChatGPT

• Chiesi Farmaceutici, an Italian pharmaceutical company, bought rare disease drugmaker Amryt Pharmaceuticals for $1.48 billion

• Cannacord Genuity Group, a Canadian investment bank, is seeking to go private for $840 million

• Money View, a banking startup catering to the unbanked, raised $75 million

• Caban Systems, an energy storage provider, raised $51 million

• Product Science, a mobile performance management platform, raised $18 million

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3. Top Reads

• Why the U.S. economy needs more people (Axios)

• Wells Fargo, once the number 1 player in mortgages, is stepping back from housing market (CNBC)

• Tom Brady and Gisele Bundchen’s FTX stake will probably get wiped out (CNN)

• How a Silicon Valley nonprofit became worth billions (Axios)

• Goldman raises $1.6 billion private capital for its climate fund (Fox)

• Corporate game plan for AI coming into focus (Axios)

• Used car prices post biggest drop ever as new luxury sales boom (YF)

• Crypto contagion deepens as Coinbase lays off 950 employees (Reuters)

• Silicon Valley layoffs go from bad to worse (CNN)

4. Book of the Day: Hot Seat

In September 2001, Jeff Immelt replaced the most famous CEO in history, Jack Welch, at the helm of General Electric.

Less than a week into his tenure, the 9/11 terrorist attacks shook the nation, and the company, to its core.

GE was connected to nearly every part of the tragedy—GE-financed planes powered by GE-manufactured engines had just destroyed real estate that was insured by GE-issued policies.

Facing an unprecedented situation, Immelt knew his response would set the tone for businesses everywhere that looked to GE—one of America’s biggest and most-heralded corporations—for direction. No pressure.

Over the next sixteen years, Immelt would lead GE through many more dire moments, from the 2008–09 Global Financial Crisis to the 2011 meltdown of Fukushima’s nuclear reactors, which were designed by GE.

But Immelt’s biggest challenge was inherited: Welch had handed over a company that had great people, but was short on innovation.

Immelt set out to change GE’s focus by making it more global, more rooted in technology, and more diverse. But the stock market rarely rewarded his efforts, and GE struggled.

“Inaction is bad leadership, but it can feel safer than action because to act is to open yourself up to criticism.”

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6. Daily Visual: Eurozone Unemployment at Record Low

Source: Axios

7. Daily Acumen: Stationarity

“An assumption that the past is a statistical guide to the future, based on the idea that the big forces that impact a system don’t change over time.

If you want to know how tall to build a levee, look at the last 100 years of flood data and assume the next 100 years will be the same.

Stationarity is a wonderful, science-based concept that works right up until the moment it doesn’t.

It’s a major driver of what matters in economics and politics.

“Things that have never happened before, happen all the time,” says Stanford professor Scott Sagan.”

Source: Collab Fund

8. Memes of the Day

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