SPAC GIGCAPITAL2 ABANDONS BOLDER DEAL TO COMBINE WITH UPHEALTH
Blank-check acquisition company GigCapital2 announced that it will combine with Uphealth, one of the largest national digital healthcare providers, and Cloudbreak Health, a telemedicine and video medical interpretation solutions provider, in a $1.35 billion deal. This transaction is notable because the SPAC concurrently abandoned a previously signed letter of intent for a transaction with Bolder Industries, a manufacturer of sustainable industrial products, because shareholders found the merger underwhelming. Shares of GigCapital2 finished up 1.6% this week on news of the Uphealth and Cloudbreak transactions. The Accelerate Arbitrage Fund (TSX: ARB) is long of GigCapital2 shares.
SALESFORCE IN TALKS TO ACQUIRE SLACK FOR MORE THAN $20 BILLION
Dow Jones Industrial Average member Salesforce is in talks to acquire messaging app Slack for more than $20 billion in a bid to expand its product footprint and effectively compete against Microsoft. If completed, the transaction would be one of the largest software acquisitions in history, ranking close to IBM’s $34 billion acquisition of Red Hat in 2019, Microsoft’s $27 billion takeover of LinkedIn in 2016 and Facebook’s $19 billion deal for WhatsApp in 2014. Slack shares ended the week up 44.7%, while Salesforce shares declined -6.1%.
RAPPER JAY-Z STRIKES CANNABIS DEAL WITH CANADIAN SPAC SUBVERSIVE CAPITAL ACQUISITION
Got 99 problems but going public ain’t one. Rapper Jay-Z struck a deal with Canadian SPAC Subversive Capital Acquisition Corp on a cannabis and hemp venture. Subversive Capital will merge with private companies Caliva and Left Coast Ventures for $282.9 million and $142.2 million, respectively, in a transaction that will create California’s largest cannabis firm. The hip-hop icon is set to join the company as Chief Visionary Officer to guide brand strategy. The market was lukewarm on the deal, as Subversive Capital’s shares rose 1.4% this week on news of the deal. The cannabis sector is so moribund that not even J-Hova can resurrect it.
Notable Insights, Articles, Podcasts, and Tweets
Listen to legendary hedge fund manager Joel Greenblatt discuss modern day value investing on the Capital Allocators podcast.
“The Accelerate OneChoice Alternative Portfolio ETF will offer investors a diversified portfolio of alternative asset classes, including private credit, real assets, alternative currencies and alternative equity.” Investors can utilize the experience and specialization of Accelerate in a new alternative asset allocation ETF at a fee of just 0.20%.
A recent study on private equity from the U.S. National Bureau of Economic Research has found that private equity firm returns lack persistence. Top private equity fund managers only had around a one-in-four probability of repeating past performance, which indicates a “pretty much random” change of repeating past success, according to study co-author Tim Jenkinson. In addition, the study found that smaller, first-time managers tend to outperform.
Alternative investments used to be complex, inaccessible, illiquid, opaque and high cost. Today, these new liquid alternatives offer everyday investors access to alternative investment strategies in low-cost, easy to use, liquid and transparent ETFs. There is a large discrepancy between investor expectations (10.9%) and analysts’ forecasts for future 60/40 portfolio returns (2.8%).
The Cardinal Resources bidding war continues as a third bidder emerged with a $1.05 per share offer. In response to the new offer, leading bidder Shandong Gold increased its offer to $1.05.
Long-time risk arbitrageur, Jamie Dinan, is pivoting his York Capital to “longer duration assets, including private equity, private debt and CLOs”, and winding down its hedge fund business. The focus on locked-up capital is a trend that will continue given institutional investors’ preference for mark-to-model accounting found in private assets, which artificially smooths returns and therefore reduces career risk.
The Bank of Canada Governor Tiff Macklem stated that the central bank plans to keep rates low until at least 2023. If one can borrow at a variable rate, it probably makes sense to do so.
“We really like SPAC arbitrage given that it’s low risk as long as we’re buying at or below NAV.” SPAC arbitrage presents equity upside with the risk profile of Treasurys.