Legendary investor Bill Miller says the window is closing on the SPAC market, but singles out 2 names that remain attractive

Bill Miller

Legendary investor Bill Miller thinks the SPAC craze may be nearing the end.

Pushed by a frenzy of excitement from retail investors and a desire from many pre-revenue companies to take an easier path to public markets, SPACs have boomed in 2020 and 2021.

“I think that game is largely winding down now,” Miller told CNBC on Tuesday. “Many of the SPACs that came public came at extraordinarily expensive valuations. But now some of them have corrected.”

The billionaire pointed to some SPACs that now have more reasonable valuations, such as Desktop Metal, a 3D metal printing technology provider that famed investor Chamath Palihapitiya also backed. The company went public in a merger with blank check company Trine Acquisition. The stock peaked at $31.25 on February 1 before tumbling to $12.70 as of April 20.

Miller also said he likes Metromile, a US-based pay-per-mile insurance technology that merged with SPAC Insu Acquisition in February. The billionaire called it the “next wave of insurance company.” Metromile shares have tumbled 50% since their public debut.

Miller also named specific stocks including Amazon, Alphabet, Facebook, and Apple, which he said his fund no longer owns.

He also singled out online car dealer Vroom.

“That’s the name we think you could make multiple times your money in the next three or four years,” he told CNBC.

SPACs, shell companies seeking to merge with private companies with the intention of taking them public, have boomed. In 2020, a total of 248 SPACs raised $83.3 billion according to SPAC Analytics. But by the fourth month of 2021 alone, 308 SPACs have raised $99.7 billion, comprising 65% of all IPOs.

Recently however, US regulators have said they will take a closer look at SPACs following the blistering pace of growth over the last year.

Paul Munter, the acting chief accountant at the Securities and Exchange Commission, in April cautioned SPAC investors about the risks and governance issues that come with raising capital through blank check companies.

In March, the SEC has begun an inquiry into the SPAC craze, seeking voluntary information from market participants.

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Stripe hit a $95 billion valuation, leapfrogging SpaceX, Instacart, and Didi Chuxing on the leaderboard of tech giants

Stripe Co-founder and CEO Patrick Collison
Stripe Co-founder and CEO Patrick Collison.

  • Stripe has raised a new $600 million funding round at a valuation of $95 billion, it said Sunday.
  • The payments firm is now more valuable than SpaceX, Instacart, and Chinese ride-hailing giant Didi Chuxing.
  • Worldwide, Stripe trails TikTok parent ByteDance and Jack Ma’s fintech Ant Group.
  • See more stories on Insider’s business page.

Payments company Stripe on Sunday said a new funding round had valued it at $95 billion, leapfrogging it above Elon Musk’s SpaceX and delivery app Instacart in valuation terms.

Stripe raised $600 million in its latest round of funding from investors including Allianz X, Sequoia Capital, and Ireland’s National Treasury Management Agency (NTMA), the company said in a statement.

The online payments processor was previously valued at $36 million, and has now tripled its worth in less than a year.

The new fundraising makes Stripe the most valuable private company in Silicon Valley, overtaking SpaceX’s last valuation of $74 billion, from February, and Instacart’s $39 billion valuation, from March.

On a global scale, Stripe trails ByteDance, the Chinese parent of TikTok, which was last valued at $180 billion in December.

It is also behind Ant Group, Jack Ma’s fintech company, which was about to go public in December with an anticipated valuation of around $300 billion, but was stopped by Chinese officials.

The latest fundraise saw Stripe’s valuation pass that of Didi Chuxing, the private Chinese ride-hailing giant, which is valued at $62 billion.

Stripe, founded by brothers Patrick and John Collison, has also surpassed the $80 billion that Facebook was valued at before it went public in 2012, as well as Uber’s valuation of $72 billion in 2018, before its 2019 IPO.

Stripe’s customers include Zoom, Salesforce, Lyft, Deliveroo, and Amazon.

The latest funding would not only allow the company to expand in Europe, but also hire 1,000 more people in its Dublin office over the next five years, and support launches in Brazil, Indonesia, and India later this year, the Financial Times reported Sunday.

Read more: Leaked email: Shannon Brayton is joining Stripe as global head of communications

Dhivya Suryadevara, Stripe’s chief financial officer, told Insider’s Matt Weinburger on Sunday that she’d been “struck by how capital efficient the business is” since joining the company, adding that the new funds will go into growth and expansion in Europe.

Stripe has been boosted by the rise of online shopping during the pandemic, such as for delivery services like Deliveroo, but Suryadevara said the shift had already begun before the pandemic hit.

“It’s a long-term trend that’s been accelerated in the last year, but it’s early days for e-commerce,” she said.

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The number of public listings by zero-revenue companies valued above $1 billion currently exceeds the dot-com era

SPACs and hedge funds 2x1
  • There are now more zero revenue public listings valued at over $1 billion planned for 2021 than there were in any year during the dot-com era.
  • 16 zero-revenue companies either have or are set to go public with a valuation of over $1 billion in 2021.
  • Much of the boom is due to a SPAC explosion. 170 SPACs have already gone public this year.
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The number of public listings by companies without revenues valued above $1 billion has exceeded what was seen in the dot-com era, according to data from the Wall Street Journal.

In 2021, 16 companies either have or are expected to go public with a valuation of over $1 billion despite having zero revenues. That’s more than double the number in 1999, three more than in 2001, and two more than in the year 2000, during the height of the dot-com bubble.

The rise in public companies with zero revenues of late is an illustration of a boom in special purpose acquisition companies, or SPACs. 

Over 90% of zero revenue companies that plan to go public with over a $1 billion valuation in 2021 thus far intend on using a SPAC to do so.

SPAC is a “blank check firm” that exists solely to list on a public stock exchange, raise money, and then find a merger partner to take public. There’s been an incredible surge in SPAC popularity over the past two years.  

In 2020, just shy of 250 SPACs went public versus only 59 in 2019. And in the first two months of 2021, there have already been 170 SPAC initial public offerings which raised some $52.8 billion.

Additionally, according to data from the investment firm Accelerate, “if the current pace continues, we could see over $300 billion of capital raised in over 1,000 SPAC IPOs in 2021.”

A prime example of the SPAC boom is Churchill Capital Corp. IV (CCIV). The SPAC is one of seven blank check firms backed by former Citigroup executive Michael Klein.

When the company said it was looking for a partner in the red-hot EV space, investors started paying attention. Then, on Jan. 11, Bloomberg reported CCIV was in talks with the EV maker Lucid Motors and shares went on a run. CCIV’s stock rose nearly six-fold despite warnings from institutional investors about stretched EV stock valuations.

Yet when reports of the Lucid Motors deal were confirmed, shares fell sharply. Still, Lucid was able to go public with a valuation well in excess of $1 billion despite being a pre-revenue firm. And CCIV and Lucid are just one example of the incredible rise of SPACs in the markets.

SPACs have become so popular even celebrities are getting involved. Both A-Rod and Colin Kapernick have taken part in SPACs in 2021, and the list of celebs entering the market continues to grow.  

All this growth has some investment firms concerned. Data from the firm Accelerate shows SPACs are trading at a significant premium to their net asset value.

The firm said in a February 24 report that “SPAC NAV premiums remain disconcerting” and noted SPAC NAV premiums reached 26.9% in February before dropping to 20.9% after the SPAC market went through a correction.

Accelerate said it “believes that high average SPAC premiums have brought elevated risks to the current market environment.”

Of course, that hasn’t stopped hedge fund managers and other institutional investors from entering the fray with SPACs of their own. From William Ackman’s $4 billion Pershing Square Tontine Holdings Ltd. to Chamath Palihapitiya’s growing field of SPAC offerings, the industry continues to boom.

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