Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Wisenthal and I'm Tracy Halliway, Tracy. Uh will obviously be remembered for a lot of things, no doubt, you know, after the pandemic, the all of the political stuff that we saw, the extraordinary sort of year in economics and the stock market and everything Somewhere down the list maybe like down like fifty or seventy or ninety in terms of like the things that people look back on, I would say it's kind of a the Year of
the Spack. Yeah, certainly, definitely if you're in capital markets, it's the year of the Spack. And I think I'm trying to remember the latest numbers, but I think it was something like sixty billion dollars raised in which was
more than the previous ten years combined, something like that. Right, So we've just seen this extraordinary surge for people who don't know, it's like, uh, these vehicles where people buy into an I p O and then the company has some certain amount of time to then go out and actually acquire a company bring it public, subject to the approval of the people who bought into the I p O. We've seen a lot in the electric vehicle space, We've seen a lot of other technology other areas, but just
generally a it exploded and be you know once, like many things, not the type of thing we expected to see in the first half of the year. I think, like thinking back to March April May, we would not expect it to be such an extraordinary year in capital markets, right. And I think one of the reasons that facts tend to draw a lot of attention is that most people are a lot of people associate them with these sort
of like pre two financial crisis excesses. So there's this idea that there's so much money slashing around in the system, people are sort of desperate to put it to work, so they'll just stick it into a blank check company, not knowing what that company is eventually going to be, and just sort of hoping um that their money will get deployed in one way or another. So I think a lot of people look at it as another example
a froth in the market. But again, as we discussed on a previous episode with someone who is actually running us back, there's also an argument that this makes sense. The structure makes sense for a lot of companies in the market. Yes, I think that's right for a lot
of companies that make sense. And I think that's also UM a part of the change, which is that not only were I I would say respects maybe associated with spect of XI, I think they were associated to with like shady companies that it's like, Okay, if you had a asset, if you had a company that couldn't do the typical I P O route, couldn't really withstand scrutiny, maybe you try to take it public via s back.
And I think it's sort of like, you know, the they didn't leave a good uh flavor taste in people's mouth. And I think that's changed. And I think that one of the things that we saw this year is like
more seeming higher quality assets came public. That way, more UM investors and banks with sort of a reputable or strong reputations willing to or eager to use these type of financing capital markets vehicle for this, and so maybe they're they're shedding some of their previous reputation, which was sort of not that shedding the spack stigma, shedding the spec that's well put, shedding the spack stigma. I mean,
we'll see. I mean, who knows, maybe we'll look back the class of twenties SPACs and they all have flopped. There have been some flops, I mean, like you know, obviously not flops, but you know, controversies. Nicola was a very popular spect that surged to the moon for a while and then all kinds of questions rose about it's
business and it's CEO left. So there's still like lots of questions about the types of companies coming public this way, but it's certainly am It does not seem to be going away anytime soon, which means we need to learn more about learn more about them. Yeah, I agree, let's do it. So we're gonna talk about spacks. We're also just gonna be talking about the extraordinary moment for capital
markets in general. I'm very excited about today's guest. We're gonna be speaking with Larry weasonek key is uh for the last three years, he's been the co president at Cowen and Company and has a long career doing global capital markets at Lehman, Barclays and so forth. And so I'm going to get the lay of the land. M Larry. So, Larry, thank you very much for joining us. Well, Joe Chacey, thanks for allowing me to join. You really appreciate it.
I'm trying to think where to start, But what do you sort of what do you do at counting company? Describe counting companies sort of role and your role within
the bank. Sure, well, look I'll start with COUN is a you know, hundred plus a year old institution, UH that really was in some respects reborn about ten years ago when the old Cowen, which had been bought about two decades ago by sak Chen, had been spun out and went into the financial crisis, probably a little bit too small and too narrow to navigate the period of O eight and O nine, and it ended up merging
with a alternative asset manager, Ramius. And so the current coun is really about ten years old, and the combination of the legacy of what was Ramius and what was count at that point and really over the last decade the firm's grown enormously and we're but but nonetheless we're
a pretty targeted institution. We're about people, UH, and we focus uh disproportionately, although not exclusively, uh in on the US markets and in particular on the arenas of equities, credit, and banking delivered to UH not only but again predominantly
growth sectors of the economy. UH. And in addition, we have an asset management business, which is the remnants of what was ramious UH, where we also try in as much as we can, focus on areas where where we have a core strength and knowledge base UM, and again
it tilts more towards disruptive areas. So with your advisory hat on, I'd be really curious to hear um what you've heard from clients in so you have a really good perspective on what corporates are basically looking for, what they've experienced in a really strange year that I think was probably marked by a real sense of urgency when it came to raising funding around springtime during the worst of the market sell off, and then we've sort of
segued into a moment where people are talking about bubbly markets, excess liquidity slashing in the system, and this idea that capital is sort of free and available to everyone. I'd be curious if you could give us some some color on what you've seen. Well, Chacy, it's a It's a great question and one that would take a lot longer than the podcast to answer, but I'll try and maybe pick a few core elements and then we can delve
into it deeper. I think the first is that, having been around the capital markets now for longer than i'd like to remember, it's always been the case that we're reminded in periods of dislocations of how strategic financing decisions of the past actually are um when challenges come about in the broad economy and the capital markets and specific many a time in good times, folks believe that the financing decisions are a choice for the treasurer or the
assistant treasurer. It's not a boardroom kind of conversation. And that always comes to roost when we hit difficult times. And that's true whether you look back in the seventies, the late eighties around the SNL crisis, whether we look at the Internet bubble, whether we look at o A. Those who didn't set up their foundation with a strong you know, think of it as you have to build the basement first, then build the first floor, then the second floor. The capital structure of a company is that
is that that basement, that first floor, the foundation. And so what we saw when we hit March, and we saw the beginnings of the acknowledgement of what the pandemic might be. Is many companies found themselves is where either their plan on the business side was being blown up or maybe their business was actually gonna be able to be somewhat resilient, but they were worried that the financing plan that they had set in place to help them with the business side wasn't as robust as they thought.
And what am I gonna do if I want to grow any more capital and I don't have it on hand? That was a big question that was you know, in every board room in in in March or April. So I like to say financing is always strategic, but we're remind of that when we hit difficult times. So we mentioned that, you know, especially the second half of sort of turned into the year of the Spack unexpectedly just
an absolute boom trade. You mentioned it bigger, more money through these vehicles than than I think the last ten years combined. When from that perspective that you described that financing decisions must be sort of strategic to the company, what was it about this moment in particular that's like
this is the vehicle for right now. What is it on sort of the investor side of the people you saw want to put money to work in this way, that they're willing to buy into these And what was it on the sort of the cell side, Uh, that there were um companies that were ready to and eager to go public through this route. Yeah, well, you know, I like the way you actually even coined the question, which is the two sides of it, which is what
were the issues why people would finance the SPACs? And then why why do companies sell into spac And I think that the first thing to recognize is for many folks who have not been around the capital markets, they see all of a sudden on Bloomberg, you know, all these SPACs being done, and they think that this is some kind of new creation. The reality is SPACs have been around in one form of another for more than
twenty years. And everything about blank check corporations they go back, you know, you can go back to the twenties and thirties of the last century and they were blank check companies. So like a lot of financial engineering or a lot of financial structures, the market and the technology have to align for them to become broadly utilized. And I think that's something that when we look back at two twenty, well, the question really is why in two twenty did they
line up so well that it became commonplace? And I think that goes to this issue of the financing is strategic question, which is that up until February of this year, i'd say most of your listeners had never heard of
us back and then something changed. And what changed was that for particularly very very um growth oriented companies, companies that maybe in the past would have gotten their next round of funding in the private market and did another year or two before going public, what happened was the private market ostensibly dried up UM. And what I'm about to say here is true both about venture backed opportunities,
but also it was true in the p world. So if you look at general private equity investment, when when sitting around with you know, financial sponsors in March and April, I can tell you the one thing they weren't talking about was how they were deploying a new capital. They
were focused on their existing portfolio. So with that going on, if you're the CEO and the board of a company, that your growth plans are potentially even taking off because maybe you have a product offering that is actually going to benefit from the pandemic. It could be disruptive consumer, it could be in things like sustainable energy, where it could be in areas like uh, you know, energy transition, where those opportunities are really unaffected, where they're accelerated potentially
by the events of what's happened in the pandemic. But you don't have the funding you need in that scenario, all of a sudden, privately negotiated transaction with an entity
that brings capital to bear becomes very interesting. And because of a number of other developments in the eighteen months prior as to how deals were getting done in this back market, it allowed for a path to real capital for the companies UM, so long as they were public public market ready, And that's where the period of kind
of the second quarter really changed things. What does public market ready actually mean in this context, because again I think Joe mentioned this in the intro, but when a lot of people hear the words facts, they think that this is basically a way of UM sort of listing light. You don't have as strict disclosure requirements and maybe you can get away with a few things like using forward earnings projections and things like that that you wouldn't be able to do if you went down the traditional A
PEO process listening. I think it's a really interesting point that as we sit here today looking back on twenty we can say that the events of I wouldn't just say two, I'd say nineteen as well as we started seeing some real significant increase in direct listings. What we would say is companies that want to go public in the US now have three paths available to them. They have standard I p O s with all of the regular structures around that, they have direct listings, and they
have sale to US back. And so I'll address particularly your question about sale to US back, but broadly speaking, I'd say a market where there's more choices and companies can match what they feel is appropriate for them to the best path um is probably a better market overall. It's a more complete market. And again we're not here to talk about direct listings, but there are a lot of folks who are big advocates for that as well
as an alternative on this back front. I think probably the two elm monts that were the biggest beneficiaries for companies thinking about going to the market that broadened. It was one the fact that they can use forward projections. And so we have to think about the world of a company that is investing for the future, that is has limited cash flows today and historically would be challenged
to get that story across to the public market. And the reason it will be a challenge is they have to rely on historical numbers, which might be just investing cement in the ground or whatever it might be to build that business, and they might be a number of years away from having real cash flows or significant revenues when you have the ability to use forward projections. And
then an important part of the second piece. Many of these deals, the way that they get done is in front of the um deal being announced, the m and A deal being announced, they line up a pipe and investment from a series of institutional investors, and those investors have the opportunity to look at those forward projections, to meet with management and have in depth conversations, much more in depth conversations then they could have in an I
p O process. So if you think of it, think of the lead investors in an I p O is being similar to the lead investors in a pipe tied to a SPACK deal. The difference is there's a lot more education that goes on for that pipe investor in a SPACK than they get in an I p O process.
So for a company who's forward or their future is fairly different than maybe what their history was because of where they are in their evolution, that process allows them to raise capital from these pipe investors, which then when that's lined up, that's when they have completed the necessary requirements to sign a merger agree and that's when the deal gets announced, and then months later the deal closes and ultimately it starts to trade in the public market.
That process that moves forward, that discussion with investors comes up with what price is a clearing price and allows them to have certainty before they announce. It is extraordinarily interesting too many companies. And it's not just because they can use forward projections. It's that they minimize the many many months of risk that's involved in a standard IPO process, where when they finally go to the market, if the market's not there for them they had timing, etcetera, they
have a failed i PO. When you have this negotiated process with the spack and with the pipe investors, that predates the merger agreement being announced. If the deal doesn't come together, the market doesn't know about it. It was never out there. You don't have all the embarrassment of a I p O getting priced at the you know, below the range whatever it is, and that has an appeal to a certain percent of the core puts out there. Certainly not everyone's still a very robust I PO uh
you know uh market, but for some companies a better path. So, you know, it's interesting you talking about transformative technologies, new technologies. There have been a lot in UM the electric vehicle, autonomous vehicle, space vehicle tech, clean energy, many of the companies. It's not just that the future is not going to resemble the past, it's that there's almost no present. Maybe it's just a technology still in commercialization or with revenue
expected to be a few years off. You know. I'm thinking about like one of the big I p o s, for example of this year, the software company Snowflake, which has a real business UM but still being valued at sort of multiples and expectations way into the future. And maybe someone just drew ruler and sort of projected where their earnings are going to be and are coming up with a multiple on that. Is there something fundamentally different? I mean, all companies are, all growth tech companies are
fundamentally you know about the future. Is there something fundamentally different about say a company that has some projectable business like an enterprise software company versus a transformative or new tech in which there's nothing really even to extrapolate yet in terms of why the spack route may make sense for them, whereas something is slightly more predictable and established the I p O route makes sense for the for
them like like a snowflake. Yeah, I do. I do think that you highlight an interesting point, which is and it maybe gets a bit more to the value of the spack team and why when companies look to sell these days, they're often doing what has become known as, in quotes, a spack off. I want to talk about spa off. Yeah, they're not necessarily responding to the first spact that that calls them up. And the reason for
that is that you're exactly right. If you're a company that is now getting to choose how you're going to enter the marketplace, let's just compare that that's sack the company and their board looking at selling to a SPACK to going the I p O path. One of the things they would do in an I p O path is they would think through, I probably need to bring different people onto my board as a public company than
I would have when I was a private company. Maybe some of the vcs are going to come off the board and we're gonna put some, you know, folks who have more public market experience onto the board. When selling to a SPACK, I can do that, and I can do that by selecting a SPACK that has expertise in my area. So let's just say, for example, I'm in
one of those hyper change arenas. I'd rather sell if I'm a financial tech company to a SPACT that has some significant fintech executives involved with it, because I'm basically picking at a minimum to new board members, but one or two depending on the structure, but two new board members for now when I'm a public company, who's gonna have oversight of the company. And so one of the things that is really important is what does the SPAC
bring to the table. What are the backgrounds of the folks from the spack who will ultimately go on my board. Maybe it's they have real good connections in the industry I'm selling to and they will help accelerate my business. So the decision of what SPAC will I sell to becomes very similar to what private equity fund would I sell to if as going private or if I have a choice of growth equity funds. So I'm now doing
growth equity round in the private market. Um, who would I want to come in to be my partner for the next five years. So think of that process of selecting a spack that company sells to as who is going to be part of my oversight and part of my ecosystem to help me complete my plans. Because all these companies, what they really want to do in the
public market is basically execute on their plan. And that's why SPACs that have a lot of expertise are emerging as being, you know, honestly better bidders than those who are just you know, a few folks have come together to try and put some capital to work. So just on the spack off point, I mean, one of the
things you you're an analogy to private equity. Just then, one of the things we heard about private equity in the latest cycle is that targets became fewer and fewer as as there was more money poured into alternative assets. As the spack space heats up, and you know, lots of people are setting these up and lots of people are looking for targets to to merge with. Um how competitive of is it at the moment? And you know, like what is a spack off actually look like in
your experience? Like everything else, It's almost like if you say, if you've met one family office, you've met one family office. Or SAM could be said about private equity, SAM can be said about how how a company decides to run there what's really an M and A process which is a back off the differences, and this is important for
your listeners to understand. Unlike a normal M and A process where the deal ends when the other side says I'm willing to buy you at a price and he and I have a money good in a spack, the capital markets decide whether that's a proper deal or not
because it has to be funded. And and that's where the combination of what's known as the d spack the process where the original investors in the spacks, or at least those who are still holding it at the time a deal is announced, they get to decide whether or not they want their money back or whether they're going to roll into the new company. And that's also where in the moments prior to that, the pipe investors, which are generally not only but generally very large institutions that
are public market investors, um they make that decision. So you have to first think about a spack off is finding the right partner who can deliver two things. One, they can really help my business grow I'm now saying my meaning on the company. And secondly, they have the credibility in the marketplace that they're going to help me get the capital that's at the end of the rainbow. The end of the rainbow is that these companies get capital via bout the pipe and what's known as the
d SPAC process. So when when we're advising, let's say a company on a spack off, we're much more focused on the quantity the qualitative elements as opposed to quantitative It's almost never about the highest price because whatever the SPAC might indicate they think the value is, it is only real if it's validated by the capital markets investors via the back end. And so what's most important is the quality of issues. What do they bring to the table.
Do they have real insights that can add to you as a public company, Do they have credibility in the capital markets to help raise the capital um And you know, will they when the when you move forward, will they be valuable on your board, because you're gonna be living with these folks on your board for a while. So just to sort of like put it all together, there's
a natural reason. It sounds like why the spack boom is also very heavily concentrated in a lot of these sort of new energy, alternative tech type things in which money is important for them to continue their development, but
also they really have sort of key strategic goals. So maybe for an enterprise software company in which the business is set and then it's just a matter of growing it through the sales force, the spack in addition to money, really brings in some strategic uh alliances that are more needed to like get from point A to point B. I think you're right for why two thousand twenty was when we say it with the Year of the Spack where you said it actually not me why why that's
where we saw the real breakthroughs. It was those kind of businesses, you know, where there's a huge amount of investment for the payoff in the future. By the way, the deepest capital market in the world is not the private market. It's still the U S public market, and so getting access to that capital is helpful. And you're and so I would agree with your thesis. I do think that's going to broaden out though, because I think that you know, we're starting to see and the price
software companies that are coming down this path. I think, what will you know? It really depends on the nature that anytime you see this much activity, um it forces
everyone to look at it. It's a little bit I use example, and maybe it's because I'm a old convertible bond originator of the convertible bond market, which is you know, over the last thirty years, there's been periods where it seemed like every company in the world was doing converble bond, and then they've been periods where literally there's almost no issuance for eighteen months or twenty four months, and the only companies that come are growth companies looking for another
way to raise capital. And so I think that we should look at what's happened with Spack says, when this settles down to a natural equilibrium, and we will, we
will find an equilibrium. It will be one of the choices facing companies that think about going public and for certain situations where they either like the certainty of the capital at a price that comes from it, they like the corporate governance benefits of picking the board members that bring real quality, but they might not be able to get as good at a set of board members if they win a natural path plaiting for smaller companies, your
typical billion dollar company coming to the market is still a relatively small comp the in the US market today, so they might end up with a much better board by selling to a SPACK than they would if they went to normal I p O path, raising fifty million dollars, etcetera. So there's a lot of things in there, but we are seeing it broaden out. I would say if we think about twenty one, I think it will be interesting is you're going to see more companies in areas where
they were willing to go the IPO path. They would normally go and spend six months nine months with all the process, but if they can move quicker, they can get a deal done in three months via a deal with a spack. They can get raise more capital that way than they might by doing another private round and then coming back with the I p O in the second half. I think you're going to see that they're gonna say, you know what, SPACs are more acceptable now. It's no longer a four letter word um in the
negative way. And what you'll see is companies that otherwise would have done an IPO that might come to the SPACK market again. Not because it's not going to diminish the benefit of the I p O process. It's just gonna be another choice UM. But we'll see it broaden. Now. It's interesting that you're talking about these trends sort of
coming and going in capital markets. One of the big trends just a year or two ago was this idea that public markets were dead and that these big tech companies or these growing tech companies were going to stay in the private market forever, because why would they ever bother to I p O when they can get as much money as they want through private fundraising. So I'm curious when it comes to SPACs, why bother going public at all? If capital is plun too full in the
private market. That is a great question, and I think it comes back to the reflections of when you look at the abyss of March we had, my example being comparing it back to other periods of time when the markets dried up. When you're in the public capital markets, you have at the deepest market available to you for raising capital. You might have doing a difficult market except a deeper discount to raise equity than you would in a more brilliant market, but you have a marketplace where
people meet every day, uh and agree on price and size. Um. That's just not true in the private market. The private market get you know. If i'd like to say, when the public market gets a cold, the private market gets the flu. You know. Unfortunately, when you're dependent on the private market, it works great so long as each successive round can be done in a higher value. Uh. And
the market is fairly fairly good. If you looked at the amount of of a capital that was put to work from March one to say, the end of June,
it wasn't a lot. And if you were a company that was living saying I can wait another two years to go public because I can always keep raising money in the private market at higher levels, when all of a sudden, that doesn't work anymore, because since the public markets down, the private markets shut unless you're willing to do it down round at a very very big discount. It all of a sudden opened up eyes again to
really a generation of entrepreneurs and their venture backers. Again, I say it that way because you know a lot of folks who are running venture capital funds and entrepreneurs that you know they were in high school in two thous eight. They don't remember the challenges of a very
difficult market. So I think it made reminded them of while the public market really does have a value, it's there to be the place where folks who want to transact in the deepest pool of capital in the world get to transact on a daily basis us and so I do think that you can't separate that from what happened in two twenty and that's why SPACs have taken off again. It's also we're seeing more companies go public. Look, you mentioned Snowflake before and again, I I don't want
to speak about particular companies. I think there's something to be said about why are all these very large tech companies coming up going public now because at some point your investors need liquidity. You know, the average venture capital company, if you look back a decade ago, m tended to have a monetization event, usually around seven to ten years. What's happened post the financial crisis is it's stressed out. The ten or twelve years. That's a long time for
venture capitalists have their money locked up. It's a long time for the founders, the employees they've hired to not have monetization. And so what we're seeing is it's not that they don't go public. They just waited three or four more years because they could. But they ultimately are either going to be sold or come to the public market because at some point the folks who risk capital
a decade ago need to get that capital redeployed. And so I think we're in a period of growth of public companies for the first time since you know, maybe you go back to Sarvane's Oxley, you know, for the
first time since that. I also think it's why you're seeing the advent of the private exchange market, where we're seeing, you know, a lot more activity where companies are allowing their historical investors to trade in the secondary market privately pre I p O, because they recognize that ten years a long time for people to keep their capital tied up. So all that leads to this symbiotic relationship between private capital for the early stage and then ultimately going to
the public market when it's a more established company. I mean, you make a compelling case that a public markets are the sort of deepest pool of liquidity and companies needed that there are a lot of company needs who ten years ago got their first private funding and it's now
time for them to realize some of that. Just cynically, though, it certainly seems like and I hate um, I won't use the word bubble, but it certainly seems like valuations on public markets not only are high by historical measures of other public markets, but that the company is going public are enjoying a pretty nice premium of from their
last private market valuations in many of these cases. And so I'm curious if there is to what extent is some of this re equalization, the re expansion of public market just sort of a recognition that if you have a good asset, if you have a company that's private or something like that, there's a decent chance that you
can get a higher valuation right now on public markets. Yeah, there's no question that all else constant, right if you if you again, if we had an academic UH finance professor on, they'd say, the same company of its public UH should always trade a higher value in the public market because because the private market, I have to have a discount for the fact that I can't get liquidity when I wanted on a regular basis. So there's no question that you know, this is true, and many times
today I think it's even more true. But I'm not so sure it's as much about where the institutions live as I think one of the things that we're seeing is particularly for hyper growth companies or the opportunity for real growth in areas that are transformative. I do think that we're seeing a generational shift. We're seeing many of
these businesses. And this is true where the existing public companies, whether it be companies that go to the public market via I p O, direct listing or spacts that in some respect the you know, the quote unquote Robin Hood investors often are taking over the stocks for some period and that dynamic where UM investors who are looking for that next great investment theme are coming in, uh in buying these stocks, they are often bidding them too levels
that broadly speaking, neither the research analysts or the institutional investors seem to be fully agreeing with those valuations. And you know that happens in a market when there's a lot of growth. We've seen it before, and those stories tend to retreat after that buying is exhausted. And we've seen some of that in twenty I think we'll see
more than twenty one as uh. You know, newer investors decided to come in in the aftermarket without necessarily having all the research and knowledge of what the right valuation should be. Those folks are not they're not involved in the I p O is not involved in the initial settat of values. They come into the aftermarket, and again,
you know that's that's part of uh, you know, the marketplace. So, Larry, I mean, one of the things that you mentioned early on is that now investors kind of have three distinct routes to go in public. There's the traditional I p O. I'm sorry, companies have three distinct routs to go in public.
There's the traditional I p O, there's this back and then there's the direct listing and um we we talked about this on an earlier episode, but it looks like regulations will allow such that companies could actually raise money through direct listing, so that they cannot only come public and get liquidity, but actually get cash for the new cash,
which they couldn't previously do. And then you have like a lot of like long time uh sort of Silicon Valley types super critical of the traditional I p O the cut that banks get the premium, the so called money left on the table. What do you see is the future of the traditional I p O isn't necessarily going to survive and for what kinds of companies doesn't make the most sense if there are these other either
master or cheaper route it's going public. Well again, I do think that you should actually do a separate podcast just in that question. We can have you back if you want. We could just even the concept of cheaper is something you have to think about because you know, on a direct listing is an advisory fee that would be paid on the entire value of the company, whereas the I p O fee is only paid on the
amount of shares that are sold in the marketplace. And so again I leave that to the academics, because I think there's an argument that at times the expenses are actually very similar. I think that the biggest issue I would just raise. I'll even add a fourth path that some companies will take, which is there's also reverse mergers.
I've been around forever where a company ends are you know, bringing with them capital and buys an existing entity and now they go public that way, So listen, I think that the most important thing, and this is where I do. I may not agree with all the perspectives every loud investor might raise ab out direct listing versus this versus that, but I think that by having choices that a company can determine what they want with their boards, they make
the most informed decisions for where they are. So companies, for example, that that are not necessarily going to be twenty billion dollar companies on day one, they know that they need to have a real following um As as I would have said back in my converbal bond days,
you know where the bond needs to be sold. It's not just bought UM in those situations, lining up, you know, researching to really understand the story, having you know, a road a road show to meet with you know, dozens and dozens investors to build up that interest for that to have a successful launch as a public company. That's still true for most companies. Um. You know, the majority of companies that come public are not at ten billion
dollar valuations. They are companies that maybe there are seven fifty or a billion or a billion and a half. And those companies require having significant interest in order for them to be able to be stable public companies. And so the I P O path or a variant of that, maybe with a spack where they have a pipe attached and they can do a deep road show with investors. I think that's still going to be with the majority
of companies that want to go public come through. But the direct listings work for certain entities and and you know, again that's why there's chocolate and vanilla. The last thing I think that I'd want to share as part of a twenty look back in the capital markets is just I do think that and we you know, we talked about a little bit, We talked about some of the sustainable stories that came to market. I don't think we
should overlook that. I think will be viewed for the capital markets as the year that sustainability or sustainable investments came to UH came to the market in a real way.
And I think when we look back ten years now and say all the awful things about the pandemic and you know, the enormous challenges society faced on a lot of fronts, UM, one of the real positives will be that stories that were focused on solid thing, some of you know, the the the globe's biggest problems were abably get funded UM and that more and more investors end investors are looking to put capital to work in funds
that invest in sustainable opportunities. And so it's not lost on me at least that two twenty was a year
for that. And maybe it's because we got reminded of how interconnected we all are, but I think it's a great thing that stories that do everything from sustainable farming, too energy transition to solving lots of other problems around you know, the limited resources we have are getting funded in the private and the public market in a way that just wasn't happening in eighteen nineteen, in a deep way.
And so I hope that, you know, we'll find that the twenties is a decade of these great ideas that hopefully will become key parts of becoming energy independent and all those things. Um, you know, uh that we'll look back at two twenty as the turning point for that. Larry, this is really appreciate you joining us. Maybe we'll do maybe we'll just have you back in a few weeks to talk about I P S. Or maybe maybe in
a year or something. But you're you're you're sort of a breadth of knowledge on this and your insight super helpful and clearing up a lot of questions that I think both Tracy and I had. Well, it was my pleasure and hopefully we have a healthier two twenty one. Let's just say that since yeah, nothing, nothing's more in our mind than that and there so anyway, without question, all right, thanks Larry, Thanks thanks so much, Larry, Cheers Tracy. I found that super helpful. You know, I I do
think that for a long time throughout last year. Still and I guess maybe still um a little bit like what's really the deal of like spacks, Like is it really a good vehicle? How much of it is just about getting that pop or finding some sexy story that you can flip to Robin Hood investors or whatever. But I'm starting to buy the idea that it is a reasonable um, a reasonable vehicle for a lot of companies. That's probably gonna be with us UH to stay for
a while. I'm going to reserve judgment for at least one economic cycle and see what happens. I will say. I will say when bark box announced that it was going public through a spack, most of the commentary I saw about that just was talking about pets dot com and the sort of two thousand's Internet bubble. That was the first thing that people were talking about. But Larry did make this interesting point about how certain capital market
structures tend to become trendy at certain times. And yeah, and I do you do see that in this idea of trying to escape market volatility or the uncertainty of an I P O process by going the spack rout. That's certainly the case. But I guess my question is as things start to normalize in our SPACs going to um not be as popular as they were last year, right?
I mean, I think that was actually probably what helped me the most, because I still I was not satisfied or I still like it was like the why now question because it's like, Okay, you can lay out a list of arguments for why for a lot of companies the spack route makes sense. But I was still hung up for a long time. I was like, yeah, but why not? What was it about in particular that caused this to catch fire? And I think Larry did a good job and help me, at least to some extent,
understand what it was about this moment. I mean, there was obviously a lot of appetite for sort of new technology, transformational tech. There was the market volatility of the moment that maybe made traditional I PR roads, I p O routes too risky or too long, too much of a long cycle. The need for public market liquidity, Uh, you know his analogy about you know, it's like when the public market gets a cold, the private market gets a fluid. So he just wanting to have that public market currency.
So I can start to see from that conversation why a number of things sort of did come together in that moment to produce what turned out to be a pretty extraordinary year. Like I wouldn't have guessed it obviously going back in the spring, but there's enough sort of moving parts that I can say, Okay, I could sort
of this makes sense. Why why it happened? Yeah, I guess the question is whether or not that experience of early is so ingrained that companies will always considers facts as a as a financing option, like one of the many things they can pull off the shelf, one of the many options forever, or or whether it's sort of like this one time thing. I guess it gets back
to Larry's point about how capital decisions are. They should be strategic, right, but I think often, like people don't really sorry, I can't talk today, they should be strategic, but I think often people tend to make a shorter term decisions, so they might just be jumping on the back bandwagon rather than actually thinking it through. Basically, I'm saying I'm unsure whether or not um never mind cut. But basically I'm saying thing, but I get what you're saying.
It makes a lot of sense, you know, I do think broadly, And this is a topic that we have to come back to, Like we have to talk about what is the future of the traditional I p O. Because there have been assailed by critics for a long time. Lots of critics of the pop and the implication that the company is leaving a lot of money on the table with this big gap, critics of the pricing, paying underwriters,
paying underwriters. You know. I'm also curious um whether whether things like road show or educating analysts is as important in the world at which we have the Internet and can learn about companies through all different kinds of ways, and we have sort of amateur analysts on Twitter and then their newsletter who don't learn about a company through the traditional route. How much that could is intermediating the need for the traditional road road show. So I think
there should be a big topic for us this year. Yeah, for sure. I I since the I P O series coming on. Oh yeah, I love that, and oh you know, also just uh the you know, we did that episode in the past about direct listings. They have since gotten approval, I think. So I think there's the total green light
for direct listing with a capital raise. It'll be super interesting to see what companies when presented with that option, how many of them are go down that route and lots lots of talk about Yeah, I think there's definitely enough going on to have a series. All right, shall we leave it there. Let's see it there. This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway and I'm Joe Why Isn't Thal? You can follow me on
Twitter at The Stalwart. Follow our producer Laura Carlson. She's at Laura M. Carlson. Follow the Bloomberg head of podcast, Francesco Levi at Francesca Today, and check out all of our podcasts under the handle at podcasts. Thanks for listening to