What You Need To Know This Week — November 21st, 2020
What You Need To Know This Week
A weekly recap to keep you informed on the most important events this week impacting markets, business, tech and the global economy.
ELECTRIC VEHICLE COMPANY ARRIVAL TO GO PUBLIC THROUGH SPAC CIIG MERGER CORP
British electric vehicle start up Arrival is continuing the trend of electric vehicle manufacturers going public via special purpose acquisition companies. This week, Arrival announced a business combination with SPAC CIIG Merger Corp. The deal that values Arrival at $5.4 billion, significantly higher than its $3.5 billion valuation from January, indicating the competitiveness of the SPAC acquisition market. CIIG shares were up 65% this week on news of the deal, as the market remains keen on electric vehicle SPAC deals.
BLANK CHECK COMPANY LONGVIEW ACQUISITION STRIKES MERGER WITH HEALTHCARE STARTUP BUTTERFLY NETWORK
Longview Acquisition, the SPAC sponsored by hedge fund veteran Larry Robbins, announced a business combination with Butterfly Network. This innovative digital health company is working to enable universal access to superior medical imaging. The deal values Butterfly Network at $1.5 billion, and comes with a $175 million PIPE financing. Longview stock rallied over 25% on news of the deal, showcasing the attractive upside optionality of SPAC arbitrage. Longview is the largest SPAC position in the Accelerate Arbitrage Fund (TSX: ARB.
TAUBMAN AND SIMON MAKES AMENDS, RECUT MERGER DEAL TO AVOID GOING TO TRIAL
Mall owners Taubman Centers and Simon Property Group reached a deal to recut their merger at a lower price, ending the litigation between the two parties on the eve of the trial starting. Simon will now acquire Taubman for $43.00 cash per, a -18% decrease in consideration compared to the initial $52.50 deal terms agreed to before the pandemic. The new terms save both parties from litigation uncertainty, while reducing the purchase price by $800 million. Taubman shares rallied 8.5% on the news.
Notable Insights, Articles, Podcasts, and Tweets
Listen to the “Bond King” Jeffrey Gundlach talk about how he thinks about investment time frames, position sizing based on asset class and how his style changes based on whether the market is alpha or beta driven on the Real Vision podcast. Gundlach’s thoughts on the volatility of returns and the back-loaded nature of some of the most attractive investments: “Even if you had perfect foresight with a 5-year horizon, you would probably go out of business.”
Forbes has an in-depth report on SPACs, which they refer to as a “no-lose trade.” According to one of the largest hedge funds in the SPAC arbitrage space, the strategy’s prospects are such that “SPACs are a phenomenal yield alternative.”
Listen to Julian talk about SPAC arbitrage on Benzinga’s YouTube show: “We really like SPAC arbitrage given that it’s low risk as long as we’re buying at or below NAV.”
Have a read of this new academic paper on blank check companies: A Sober Look at SPACs. The report discusses the attractiveness of a SPAC arbitrage strategy: “Among the 2019–20 Merger Cohort, the mean annualized return for IPO investors that redeemed their shares was 11.6% — for a risk-free investment.”
Lightning EMotors, a private company focused on fleet electrification and cutting out fuel consumption, is in discussions to go public via SPAC GigCapital3. In addition, Forum Merger III Corp., is in talks to merge with electric vehicle startup Electric Last Mile Solutions.
CI Global Asset Management is teaming up with Galaxy Digital Capital Management to launch a new bitcoin closed-end fund in Canada.
Seth Karlman’s hedge fund Baupost is dipping its toe into SPAC arbitrage, with newly disclosed positions in Pershing Square Tontine Holdings and sports-focused Redball Acquisition. We have noticed that hedge fund giant Millennium Management has come into the SPAC market in a big way this year, taking large positions in dozens of SPAC IPOs.
The S&P 500’s portfolio manager, err… index committee, has finally decided to add Tesla to the S&P 500 index. In a move that perhaps finally puts to rest the notion that the S&P 500 is a passive index, S&P Dow Jones Indices is seeking feedback from the investment community to determine if Tesla should be added all at once or in two separate pieces given its sizable market cap. So there you have it, the S&P 500 is an actively-managed fund and is now partially managed via crowdsourcing. Tesla’s stock was up 13% on the news.
King Dollar? Not anymore. Online poker players are taking nearly all of their winnings in the form of Bitcoin.
Under-the-radar Canadian tech unicorn Verafin entered an agreement to be acquired by Nasdaq for US$2.75 billion. The Newfoundland and Labrador based fraud-detection software company was founded in 2003. Post-closing, the company’s 600-person team will stay in St. John’s.
November has been a very rough month for quantitative hedge funds, as the dramatic reversal in market sentiment has skewered the momentum factor. Renaissance Technologies’ global equities fund is down about -25%, while its market neutral fund dropped approximately -27%. Renaissance told its clients, “It is not surprising that our funds, which depend on models that are trained on historical data, should perform abnormally (either for the better or for the worse) in a year that is anything but normal by historical standards.”
Warren Buffett’s Berkshire Hathaway exited its decades-long investment in Costco in the third quarter. It also put $5.7 billion into four US pharmaceutical stocks.
Home Depot is buying back its old subsidiary HD Supply in an $8 billion deal. It had spun off the industrial material wholesaler over a decade ago.
Junior Canadian oil sands company Osum is urging its shareholders to reject the hostile takeover offer from energy fund Waterous.
