Nasdaq, Inc. (NDAQ) Earnings Call Transcript & Summary

Hello, thank you for joining today's event, SPAC to the Future III, the third and final event for 2021 in this series. We have an illustrious panel of guests who you'll meet momentarily. We have SPAC sponsors, advisers of all kinds. We have a capital markets guru, we have an attorney, we have a proxy solicitor, we have a PR expert. You name it, just about everyone you could imagine who's in the SPAC world, are going to share perspectives on what's going on in this very exciting year and what to look forward to in 2022. Before we jump into the meat of today's event, I just want to point out a couple of housekeeping items. One of the best parts of this format is the opportunity to ask questions. [Operator Instructions] And lastly, if you want to watch this again later, if you missed it or you had to drop off, it will be on the website on ipo-edge.com, and you can also find it where it was announced on Yahoo! Finance and on Bloomberg terminals. Before we get to our first guest, I just want to point out some really interesting data that we've got here from our friends at Sentieo showing something really interesting, and it relates to one of the topics that I want to dig into, which is retail. We have a chart here from Interactive Brokers via Sentieo, our friends at Sentieo put this together for us. And this shows some really interesting data on daily average trades and accounts at Interactive Brokers. This is a proxy to us for retail action. And you might have thought that it had slowed down and it spiked in March, but that doesn't seem to be the case -- or February that is, continues to grow, and we see a lot of interest specifically in a couple of SPAC names we'll talk about a little bit later. But retail apparently is here to stay. One more slide, we're going to save this for later, Jarrett, we can check it out quickly now. This is from S3, and we're going to talk to Ihor about this in a little more detail, but you can see here that there are some SPACs that have pretty high short interest. Up towards the top there is Digital World, which, of course, is the one that's merging with Donald Trump's company, looks like about 10% of the float and Altimeter Growth is even higher there at 28.5%. Now we were going to have Eklavya join first here, and I was going to hand it off to Jarrett. But Eklavya, are you here yet? Maybe not. Okay. We're going to go to Chris Weekes first, then we'll go to Eklavya after that. Chris, thanks a lot for joining. It's been a long time. Folks, believe it or not, Chris did a roundtable with IPO Edge, an actual roundtable in person at the Cowen office about 2 years ago. And I think this is really interesting to get his perspective on how much the world has changed since then.

I mean, Chris, first of all, let's just go back and get a little bit of history. I remember talking to you 2 years ago, it feels like a lot longer than that. And at the time, we were discussing how there was a certain profile of company that could work with a SPAC and it was basically a profitable company, and then Virgin Galactic happened. So much has changed. Where do you think we are now? Can you just give a little bit of an overview of what you've seen happen over that long time period?

Yes, sure. A lot has certainly happened. If I look back to -- when we did that, I think that was kind of 2019 time frame. If I look back sort of starting in 2020, what has happened over the last, really, 2 years in earnest in the market, we have seen a total of close to $1 trillion of enterprise value has merged with SPACs, either has closed a deal with a SPAC or has been announced and has yet to close in that time frame, which is a staggering number. We've seen 785 or so SPAC IPOs. 500 -- north of 500, I think we're running on 540 as of this morning SPAC IPOs just this year. We've seen $450 billion worth of SPAC mergers closed since then. And I think when we had talked initially, it was in 2019, I think those numbers were something like 59 SPAC IPOs and maybe 28 mergers had closed. And so there's just been an incredible -- the velocity at which the market has grown has been nothing short of incredible. Look, I think the profile of the types of deals have certainly evolved. We continue -- as we sort of saw in 2020 and through certainly the first half of 2021, and we continue to see it, but maybe to a lesser extent, a little bit growth outperforming value and sort of the more growth-oriented, maybe even pre-revenue businesses that have projections that are further out than either the year ahead or certainly like a traditional IPO LTM have thrived. I think there were something like 80 pre-revenue mergers over the last 18 months for more than $100 billion of enterprise value. That's staggering. I mean if you look at the traditional IPO market for pre-revenue growth companies, I think this year, there were 6 -- or since 2020, I think there were something like 75 pre-revenue companies, of which 65 or 67 or something were biotech. So in the traditional sort of IPO market, you just don't see that type of profile company going public, but you do see it going public through SPACs and you continue to. And so it's the evolution of the product and the asset class has been impressive. I think recently, more recently, we have started to see a little bit more of a focus on some more mature businesses going public through SPACs. I don't think that, that means that we've seen less momentum in the growth stories, but we've just seen a little bit more of a pickup in cash flowing, more EBITDA generating and mature businesses coming public through SPACs.

That makes a lot of sense, Chris. That's a great concise overview for that long time period. One thing I believe that we talked about at that time, and I'm wondering if this mindset still exists at all, is it SPAC is a 4-letter word that people say, you're taking me to a third-class restaurant on a date or something rather than doing a regular way IPO. Does that thing persist at all? Or is it truly institutionalized now?

Look, compared to the regular way IPO market, if you think about what the SPAC -- when is the sort of SPAC IPO, it's call it either at the time of the announcement, but really truly at the time of close when you -- and you have the full appreciation for how much capital is actually going to be deployed into the business. But if you combine those, just this year, 395 announced and/or closed SPAC deals, 336 IPOs, right? And so clearly, it has been a very -- it has been an asset class and an alternative to going public regular way that has certainly picked up a lot more pace and get garnered a lot more attention than say direct listings, right? There have been, I think, 10 direct listings since 2018 or 11. And so yes, it is certainly no longer -- despite it actually being a 4-letter word, it is no longer a 4-letter word and it has certainly become more mainstream and a very viable alternative for companies that want to get public.

Phil just chimed in here in the chat, and we'll bring this up later, Phil, it'll wait your turn. Saying that you used to have -- you had to spend time with sponsors explaining what a SPAC was. I mean I guess that's over now. It's -- at least people know what -- understand the structure largely.

Well, yes and no. I think there's still -- the learning curve has certainly -- it is not nearly as steep as it used to be. We still do panels like this. We still do lunch and learns. We still do sort of SPAC 101 and education for companies, many of which actually are more venture-oriented. So we do a lot of work in the venture community. We do a lot of work in the private equity community in terms of educating those investors and those who own portfolio companies with the very sort of -- some of the nuances around the structure and explaining how sort of normalized the SPAC alternative relative to a traditional IPO and what the pros and cons and benefits and considerations are for all.

Great. Chris, I'm going to pause you right there because I think we have Eklavya now, and then we're going to come back to you. Eklavya, are you on the line there? No? Maybe not. Okay, not yet. So Chris, let's talk about something more...

Hey, John, can you hear me?

Oh, here he is. All right, Okay. Jarrett -- that's great. Okay. Chris, we'll come back to you in a second. Jarrett, why don't you pick it up with Eklavya here. Eklavya, of course, is the Global Head of SPACs at Nasdaq, and we're going to hear a little bit of his perspective quickly. And we'll come back to Chris and then we're going to bring a group on together. So Jarrett, I'm going to hand it to you.

Great. Thanks, John. Eklavya, welcome. I know you're dialing in over the phone. What can you tell us about the SPAC landscape at the moment? I know there's, of course, the SEC with increasing attention on conflicts, what do people need to be aware of in your opinion?

Yes. No, I appreciate it. And sorry for the tech issues earlier. So what I would say is the SEC is placing increased attention on conflicts. So [indiscernible] really should be attuned to any perceived or actual conflicts of the team, sponsors, shareholders. They're focused on -- certainly, and when I say they, I mean the SEC, they're focused on due diligence, target companies by the sponsor, the Board and the officers and also important from a corporate law perspective as well as from the standpoint from M&A and D&O insurance coverages, which the D&O insurance policies have skyrocketed. And companies merging with SPAC should also be involved in setting up the post-combination Board and management in a way really that is ready for life as a public company. And I would say one thing that stands out there is CFO with experience or understanding of a public company requirements. So that thing, I think, is pretty key. And then companies merging with SPAC should we also focused on making sure that, that combined company will meet the listings requirements, including the number of shareholders after the redemptions, which has certainly been an issue over the last couple of months at the time of the business combination. So from a listing qualification standpoint post-combination, the company will have to meet those listing requirements, both quantitative and corporate governance. And at Nasdaq, we're extremely focused on investor protection, extremely focused on making sure that the investors understand the structures of the SPAC, the risks that are involved with the investment. And we always, like any other exchange, conduct a very thorough evaluation of the application. Our listings qualification group continues to monitor SPAC to ensure that they meet the listing standards. And look, SPACs are going to continue evolving. It's a very exciting time in the SPAC market. We've had a record number of SPACs. I know these are some of the themes that we're going to talk about later in this great program, but we're probably going to see changes in structures that will align the sponsor compensation with performance. I know it's a long-winded answer, but I figured I cover a couple of areas, and hopefully, that gives you some context here.

That's great. Now talking about investor protections, are there any specifics that you can give us on how you protect investors without going into any obviously company names. Can you give us a little bit of detail?

Well, so the listing qualifications group at Nasdaq is self-regulated, regulated from the outside. And it's really about meeting those requirements that the SEC has set forth. We are a conduit in which we apply the rules and the regulations of the SEC, and those can be found on our website. So just like any other publicly traded company, SPAC sponsors and the de-SPAC target company must meet those requirements.

Great. Yes, John, back to you.

Okay. Good. So let's have Chris on for a moment here, and then before we go to Ramey. Chris, I just wanted to touch on something quickly, and I want to get a group perspective on this, too. So you talked about a little bit how there's been -- or I'm sorry, we discussed yesterday when we got together about how there's something like 25 IPOs this week, but not so many closings. Is that an imbalance to worry about? Or is it more of an ebb and flow that will work itself out?

That was yesterday when we talked about that, John. Today is a new day. We've actually -- see now -- yes, look, there is a -- and if I have a chance at some point, I'd love to actually respond to one of the comments before around...

Yes, yes, you can.

Because I think it's a really interesting one in terms of what the SEC is going to do, but actually, I think is what is actually already happening. And I think that the market is actually driving competition amongst SPACs, such that they have to align their incentives and their economics to be more performance-driven, and that could be EBITDA, stock price, other metrics. So interesting for maybe a discussion later. But look, I think this is -- markets are incredibly efficient. I live in the capital markets and I see it all sort of day long. We have seen in the first quarter of this year something like 50 PIPEs in the month of January and 30 PIPEs that were announced in the month of February. Now we've seen over the last 2 months sort of 20, 11 in each month. And so the market is adjusting to certain changes, some are technical, some are fundamental. We saw a slowdown certainly in the SPAC IPO market between the month of March and, call it, August, and that was really more of a function of the SEC changing the warrant -- making some warrant treatment -- accounting treatment changes. And what we expected was that in order for the IPO market to come back, terms need to adjust such that the investors have more appetite to come in and actually buy those issues. And we've seen that. And so over the last 2 weeks, last week, we saw something around 25 IPOs. This week, we'll see another 25. We actually have taken 3 SPACs public this week alone. But I will say, last week, we saw 3 mergers get announced. We've been averaging between 6 and 7 announcements and up to 15 between announcements and closings prior to sort of 2 or 3 weeks ago. This week so far, and it's only Wednesday, 7 deals have announced. Seven mergers have been announced this week and, 6 of those 7 have actually announced in connection with whether it's been a PIPE in connection with the merger. And so I think markets, again, are very efficient. And we saw a bit of a slowdown after a very, very busy season in the first quarter. And now we're coming out and moving into the fourth quarter and towards the end of the year, and it does seem like things are picking up again.

Great. And did you want to respond to something Eklavya said there, too, Chris? Or...

Look, I just -- I thought it was really interesting because despite the notion that the SEC is going to come out and maybe -- at some point, it's going to be the fact that they come out and talk about aligning, and Raluca can probably talk about this or Jim, but aligning sponsor economics and incentives with performance and, therefore, investors in the SPAC and in the company. We're seeing that. I mean almost every deal that we see get announced today has some element of a restructure of founder shares and the sponsor economics to align more appropriately with the performance of the company and with then, therefore, investors, both institutional investors and retail investors. And then I think that's really important. And a lot of that is driven off of -- it could be either stock price performance or it could be the company has to hit certain metrics like EBITDA or revenue in order for sponsors to receive the economics that they purchased to begin with.

All right. Great point. Now I want to talk more about PIPEs, but let's do that with the group. In the meantime, let's bring Ramey on, and I'm going to pass the baton back to Jarrett here for a minute. Ramey, thanks for joining today. And I'll let Jarrett have a little chat with you.

Thanks, John. And welcome Ramey. Ramey, what's your take on the current state of the SPAC market? We've been talking a little bit about how -- is it too soon to call it a comeback for SPACs? What's your take?

Well, I think -- first, thanks for having me. And can you all hear me okay?

Yes.

Yes.

Okay. My Internet has a knack of knowing exactly when to slow down. So I mean I think to Chris' point, the IPO market is definitely ramping back up. If you look at the monthly totals month-over-month since March, it's been steadily creeping back up to the point where it's almost back to where it was in sort of Q3 of 2020. I don't think it's ever going to get back to where it was in January, February and March. Frankly, I just -- even if the market compare it, I don't know that the advisers could physically do that many deals. I see Chris smirking. I remember having some conversations with him in Q1. So you certainly see that happening. Now what -- the other thing that we are seeing is deal closings are getting fewer and further between as compared to Q1 as well. So you are starting to see -- you're seeing the IPO market come back, but there's a huge backlog of cash and a number of deals that are going to be out hunting and trying to get deals done in the next 15 to 18 months.

Right. Now PIPEs are also getting harder to raise, and we're seeing downside protected PIPEs. What can you tell us about that?

So I think with deal announcements not being associated with almost immediate pops like they were in Q1, a lot of the institutional investors that were investing in PIPEs have been more reluctant to buy in part because they may be able to buy in the aftermarket at a discount if they like the story. So you're seeing fewer PIPEs and you're also seeing sort of different PIPEs. One of the interesting things that's come in lately is strategic investors who are willing to invest in a PIPE in exchange for a contractual arrangement with the company. I think -- but if you look at -- if you go to recent 10-Q, you'll see that the -- the name is escaping me right now. But the Internet services company that had made 13 PIPE investments in SPACs, Palantir. The ticker makes me want to say Palatir right. And so you're seeing that. The SPAC deals that are getting done with PIPEs are -- a lot of the PIPEs are coming from strategics. They're either coming from a Palantir or equivalent or they're being invested by existing owners of the target company, like Volvo's investments in Polestar. So fewer of the big name institutions are investing in PIPEs and more -- you're seeing more strategic investments or affiliates as the target.

All right. And then just back to the SEC, we can't escape the topic. So let's put it to you. Do you get the sense that what the SEC has been saying is going to slow down deals?

Absolutely. I mean so the SEC -- the average duration from announcement to closing of deals has crept up over the last 12 months. In 2020, you'd see deals getting done anywhere between 3 and 4 months on average from announcement. It's now closer to 6. And part of that is the staff of the SEC has started asking a bunch of questions. Almost candid questions about the economic [indiscernible] the sponsor conflicts of interest [Technical Difficulty]

I think we may have lost Ramey there. Let's bring in Barbara.

Yes, yes. All right. Ramey, we're going to come back to you in just a minute. I think we lost you there. Barbara Ard, a good friend of our program. Thanks for joining. Barbara, of course, is Managing Director and Accounting and Transaction Services Lead at MorganFranklin Consulting. Barbara, thanks for joining. Barbara, this is -- I want to ask you something I think we've discussed in the past. When you talk about a SPAC versus an IPO, I think there was a time when it was perceived as a simpler structure and a faster way to go to market. But you were telling me when we spoke yesterday that some people are starting to change their minds about that. What do you think?

Yes. It's really interesting, John. We used to talk about -- back in the day before SPACs were really a thing, we used to talk about companies that were looking to do an IPO dual tracking. So they were looking at should we do an IPO, we want to do an M&A transaction, but we want to keep both of those as options because that tends to drive up the value of deal. What we're seeing today is almost triple tracking. We have companies that are looking at should we do -- often driven by their P/E owners, should we do an M&A transaction, should we do a SPAC, should we do an IPO. And just anecdotally, we've had a number of clients in the last month or 2 that were going down a SPAC route and have changed their mind and decided to do a regular way IPO. In one case, it was a brand that really was an e-commerce consumer brand and just felt that the IPO would be a better path for them from a marketing standpoint. In the second case, it was a smaller company that probably no one has ever heard of that had an offer and an LOI on the table from the SPAC was -- called us on a Tuesday and said, "Hey, we're probably going to sign this offer tomorrow, so be ready." Called us the next day and said, "By the way, we decided not to do the SPAC." We got a call yesterday from a very large, well-known investment bank who said, don't do the SPAC, we can get you a lot more money in a regular way IPO. So it really -- there really is this disbalance right now. And I guess just one other point there, I think the people are starting to realize that SPAC is not an easy way to become a public company. You still have the advantage that you're negotiating with the SPAC. You have some idea what the value of your company is going to be. And the other advantage was always you viewed as you could put projections in your marketing materials. Those have -- you still have the advantage of negotiating with the SPAC, although the SEC is looking at conflicts of interest and how valuations are done and actually asking some questions around valuations and some situations we've seen. And then as far as the forecast, that's become a real hot button with the SEC, and they're asking a lot of questions. I know of 1 SPAC where they went back and forth 3 times with the SEC on comments about their projections. And another one where they were asking questions about how do your projections in your S-4, why are they different from the projections that you used when you did your PIPE. So it's all become much more complicated.

That's really interesting stuff, Barb. And I think I want to bring this up when we have Raluca, Jim and Alan on momentarily and see what their take is on that. I mean I think that there are situations where the SPAC really does bring something extra, there's -- if they have experience in an industry and so on. But we'll ask those 3 about that and let them explain why they bring value to the table. But let's talk about the SEC a little bit more. So you talked about the SEC looking at something like projections in detail and dragging things out. What do you make of all that? I mean we just heard from Ramey that absolutely SEC is slowing things down. But what's your take on the SEC? And if you look ahead, is the SEC going to tighten its script even further next year? What are you expecting?

I think the SEC is going to tighten its script further. They have basically said on several occasions, Gary Gensler has said that he intends to tighten his script. He says that he intends to protect investors. But certainly, with the investor protection, that's going to mean that you're going to get more oversight from the SEC. I think though that the message to anyone who wants to be involved in the SPAC transaction, either the SPAC or the target company, make sure that, that target company is prepared to be a public company. We -- I would agree that the time frame has expanded. But we compare one company that we worked with recently went through a SPAC transaction in about a 3.5-month period. And they did get around the SEC comments, but they responded and all was well. There's another company that we worked with, that went -- that it took 7 months, and there were a couple of things that drove that. One of them was they used up about a month because they didn't know who their -- the proxy needed to go to which we all know can be an issue. And the other one was that they just weren't ready. They didn't have their financials in good shape. They didn't have their audits done. They didn't have their governance in place. And so control what you can control, which is just being ready. And if you're a SPAC, you should make sure you understand the readiness of the target you're looking at.

All right. Great. Don't go away, Barbara. Looks -- I think Ramey has gotten reconnected from a different vantage there. Ramey, are you all set, I think we can -- can you hear us?

I can. Can you hear me?

All right. Good. All right. And Chris, please come back as well. So I want to talk about something that we discussed yesterday, so something like 700 SPACs, $200 billion. What's going to happen? I mean people complain, especially the financial press, probably not us so much, but the rest of the mainstream press say that there's this incentive and to get a deal done, it's maybe SPACs are going to get the wrong kinds of deals done. But on the other hand, I think, Chris, you said, well, maybe some of them will liquidate, maybe that's not the end of the world. What do you say, Chris?

Okay. Theoretically, there is a perverse incentive to get a deal done no matter what, right, because you have a time line. The reality is you cannot get a deal done unless investors in the public market approve and invest in the deal, right? That is the reality. And so I think it's a little bit, yes, there is risk that you have some sponsors who may choose to do a deal or elect to go -- explore doing a deal with a company that may not, to Barbara's point, be ready to be a public company. We don't think investors are going to buy into those. And so we don't think those deals will close. If you have 100% redemptions and you have no votes across the board, they won't close or they will close with very little float, which is obviously not a good outcome. I think it's important, to Barbara's point, the way at least Cowen thinks about it, we don't think about the SPAC really is any different than a traditional IPO in the way that we think about public company readiness, PCAOB audits, right, financial models. It all has to look the same. And I think over time, the sponsors are going to have to treat it the same as if they were taking a company public the regular way, route through an IPO and doing that work. And so yes, with 700-plus SPACs that we may be -- that may be seeking by the end of this year, will all of them end up with a deal that is -- one that should be a public company and a successful transaction? I don't think so, but I think those will result in not bad deals getting done in the market, it will result in those SPACs actually having to liquidate. And by the way, if they do liquidate, investors are protected, right, because everybody gets -- anybody who invested in the SPAC, if the SPAC liquidates, they get their money back and their compounded interest. And the only people who lose in that situation are the 3 very, very successful sponsors we have on the phone here today.

Great. Ramey and Barbara, I want to ask you something. I think, Ramey, I probably asked you this on another panel before, but we touched on it yesterday as well. What about companies that are pre-revenue? I mean are there enough companies out there that are mature and EBITDA-positive that they can be -- they can make up all the SPAC deals? Or does there still need to be some segment of these -- of the deals getting done that are growth companies?

I mean, my personal view is that the SPAC structure and the disclosure rules around SPACs are particularly well suited for high-growth companies, be they pre-revenue today or modestly revenue positive today, but have strong prospects. They need a lot of cash to finance their development. And so they're well suited for SPACs because SPACs are structured as a public company merger. So projections are not just permitted, but they're basically required. So I personally think you'll still see a bunch of pre-revenue companies going public this way. And one interesting thing is -- Chris mentioned the number of pre-revenue companies that go public via regular way IPO. Those are almost all in health care, whereas interestingly, a lot of the SPAC transactions are sort of in next-generation tech is what I would describe it, automotive or be it all, et cetera. So I don't know. I think there's a lot of capital that needs to be put to work in next-generation tech, energy transition and the like. And so you're going to see a lot of new companies that are ready to go public in that space as compared to mature companies that may just decide they'd rather go public via an IPO or a direct listing.

Yes. Yes. Yes. Just sorry, one last quick point on that, Ramey, I was going to mention that. And not to mention, at some point, and this is probably an entirely different panel that you could spend the whole time on it. But the job creation, if you look at the numbers of jobs that are being created by the companies that are what I'd characterize as being in category creators, right, industrial technology, controlled environmental, agricultural technology, electric vehicles, batteries, EV infrastructure. The number of jobs that are being created through the -- those companies that are actually -- now have access to that capital is tremendous. So I think we -- it's a point that should be made.

We've never touched on that before. That's a really good point, Chris, and it totally makes sense. I want to bring on the SPAC sponsors, but really quick before -- and by the way, everyone please stick around. We're going to bring you all back on towards the end. But I want to ask what you guys think about the role of retail. We showed that chart from interactive brokers in the beginning. When you were all talking to clients, how do they look at retail? My view is that a little bit is good, but it can get -- and we can talk to Jim about this. If you have too much retail, it can make things really complicated. So where do you stand on that, Ramey?

Well, I think -- I mean one of the benefits of SPAC IPOs is it is an opportunity for retail investors to get in on IPOs that they couldn't if this was underwritten in a regular way. So I think, personally, there's a benefit to this. It's another opportunity for regular way investors to invest in companies that might otherwise just be owned by VC or private equity. So I think it's welcome in that respect. But to your point, it does -- they present their own special nuances of understanding how the process works and understanding the risks and rewards. So I think retail investors are welcome, but they really do need to understand what they're getting into, if they're investing in pre-revenue companies.

John, just quickly on that. When you are soliciting shareholder approval and if you have 50% or more retail investors, that becomes really complicated. And I'm sure Kevin can talk about it much more than I do, but we did experience that, and it becomes complicated.

Well, that's a good -- Barbara, I'm going to bring you on in just a second, but Barbara, I just wanted to see if you had any take on that. When you're advising companies on being ready to get out there and prepared, is it important to understand how retail investors think? And is that a conversation you have? I mean how important is it?

Well, I definitely think it's important as you're weighing a SPAC versus regular way IPO because it's just one of -- if you are looking at -- and also as you're deciding what SPAC you want to go with, because if you have one that does have a lot of retail investors, you have to understand the complications that, that can present. So I think I just agree with what everyone else has said. It's great because it gives people who wouldn't otherwise be able to invest in this type of company the opportunity to do so, but it also comes with its complications and taking a month to figure out who needs to vote.

Great. All right. Now Raluca, that was a good segue. So we've got Dr. Raluca Dinu here. By the way, all 3 of the folks we have in this little mini roundtable have been on our program before. In fact, Raluca's coming back next week with her next deal BigBear.ai. So we've got Raluca. We also have Alan Mnuchin who took Sharecare public with Falcon Capital, and we have Jim Mutrie. Jim was on one of the very first fireside chats we did, and it came about, in fact, because of the retail presence out there. Jim, maybe can -- to refresh people's memory, what that was like when the deal appeared to be very, very appreciated and I would say, loved by the market. I mean it was trading at $30, $40, right? But the issue was that people didn't know how to vote their shares, right?

Yes. Raluca touched on it. Actually, Ramey -- a few people kind of touched on the dynamics that we live through with ChargePoint. And just to reset, I guess the vote was -- it was at the start of the year, January, February time frame, and a lot has happened since then. But we had -- and actually, Barbara made a comment about look at your -- when you're a target company, look at the sponsor that you're discussing with and think about do they have retail in their shareholder base? I mean, in general, most SPACs don't have retail on the front end. It's after they announced a deal, and that was we had kind of blue chip investors guys who we had invested with for years who have made money with us in our shareholder base at the start of the IPO of the deal. And then we announced that deal with ChargePoint and it did appreciate very well. And this is kind of the pluses and maybe the minuses of retail, in part driven by retail's excitement for the deal, just what you said, it ran the $40-plus. And at some point, I think when we were in the month leading up to the vote, it was in the high 30s. So obviously, you would think this is a slam dunk of a decision, but all those blue chip institutional investors rotated out of the stock when they buy in at $10, it's trading at $35, they may love us, they may love the company, but they just -- they have an obligation almost to take some money off the table, if not trade out of the stock. So yes, retail then rose up to 65%, 70-plus percent of our holders as we're getting closer to the vote. And then that was the piece as kind of -- as maybe Ramey was touching on, retail -- and I love the democratization of IPOs. I mean it's absolutely a way for people to be able to invest in companies that they wouldn't otherwise be able to just through the traditional IPO route, and I'm supportive of that completely. The one dynamic that Ramey touched on is there's kind of an educational obligation on both the SPAC, but plus the target company as well to help investors -- retail investors understand what their obligations are. What are they buying, not only kind of when do they own in the new company, when is that new company trading, but they are a shareholder, what are your obligations as a shareholder and you want them to vote. And hey, yes, you've made a great return or you have or you haven't. But for you to actually get the stock in the new company, you have to go out and vote your shares, and that's a cumbersome process. So sorry, just to wind up quickly. So John, what you helped us do -- and as you said, this is kind of earlier on in this really high run-up of retail, I mean, we had to go on a mass kind of marketing campaign, and it was an educational campaign, just yes, the deal is trading well. But if you are a shareholder on the record date, you need to vote your shares. Here's how you do that. And we put that out and help do that with ChargePoint. We put it out on ads, Facebook and other places like that. We went through social media. We went to programs like you. Not trying to saying one way or the other how to vote, just simply you need to vote and this is how you do it. Because most retail investors -- I mean I hate to admit it, for years, you get those prospectuses in the mail, do you really go and vote your shares or you just throw it away? And that's what most people are doing who thought they were going to get some 200% or 300% return in our case, but we had to battle and claw just to get the quorum for the vote. And then obviously, it was overwhelmingly approved when we finally did.

Well, that's terrific. No, I remember that conversation with you, Jim. I mean when you own stock and you're a retail investor, you just think I'm too small to matter. But in aggregate, you sure do. Alan, thanks for joining. Alan, who has come in this afternoon as somewhat of a surprise guest. We're very happy to have you. Alan, of course, is on our program as well. Alan, what's your take on retail? I don't think that you had quite as much retail as Jim did, but how did you look at it?

We did not. I would say our story was more of a not the kind of sexy story that naturally attracts retail investors. So retail was a minority in our deal. I've seen it in other deals where I've been a Board member, actively involved as part of the sponsor group. And I agree with what Jim is saying, it's kind of a blessing and a curse. It definitely creates increased volatility which can be a problem around the vote. The flip side is you're less likely to see redemptions out of retail than you are institutional. So it tends to bring down your redemption tally. I think the market, like all markets needs to move towards the right balance between institutional and retail ownership for it to be a healthy market. And we're still not seeing a lot of retail formation on the front end in connection with IPOs. From my perspective, most of the activity is between announcement and closing, people who are basically playing the arbitrage around the deal and are looking for a high-vol outcome to trading-oriented. So whether it's working with the retail platforms like Robinhood, eToro and so forth, we're working towards just better capital formation on the front end, I think, a healthier retail component and the right type of retail will lead to a better dynamic in the market.

Great. And Alan, I want to ask you about industry focus. So Sharecare, of course, health care, but also innovative. What -- do you think a SPAC is well suited for that industry? Or is that too much of a generalization? I mean can you think about it that way? And I want Raluca to weigh in on that, too, because she's touch on a couple of different industries herself.

Sure. Well, in the case of Sharecare, the opportunity we saw, the company self-described itself, and you'll remember this probably, John, as sitting at the intersection of health care, technology and media. So we saw it as a scaled platform, not unlike what Netflix has been in video and Spotify in audio. And we thought as mediatech investors by background, we understood the process of building a scaled platform. And here, in this case, there was a B2B and a B2B2C strategy. And so there were a lot of elements that allowed us to look at it as more than health care. And I think the market is still a little bifurcated between health care tech and health care services. There have actually been a lot of deals in health care, I think over 20 deals in between services and tech in the trailing 12 months. A number of those deals like ours were priced in a real updraft in the market, not just for SPACs, but where health care spiked based on COVID and other considerations. And so I think the pricing dynamic was a little out of whack actually in the January, February time frame. The PIPE market was still strong, but the market was very frothy. And if you look at the cohort of 11 or so deals in health care that get priced in that window in January, February, only one of those deals, which is 23andMe, is trading above $10 a share right now. Now there are a lot of good companies in there, and I think they're going to work their way out. Sharecare reported Q3 earnings today. The stock is up 10% based on doing exactly what they had told the market they would do and then some. So I think good companies will do well over time. And health care should be, just given the size of the market, the TAM, the digital disruption that's going on in health care, fragmentation that exists, I think there are a lot of important elements that lend to SPACs doing their thing in terms of utilizing some of the inherent advantages in SPACs to do a better job of pricing deals. So I am a believer. Although I'm not a health care investor sort of by background of domain, I am a believer that it's -- it will be a good category. It needs to un-dislocate itself a little bit from a pricing and valuation standpoint. But I think long term, just given the size of the market and the number of companies that can come, it will be a successful sector. And there are a number of good stories, like Canoo comes to mind, which was in November or Q4 of 2019 deal that's done quite well.

That's terrific. Raluca, what do you say about this? I mean you've been in a couple of different industries, but tell us what you think about health care.

I love health care sector in general. I think Alan touched on many of the points I had in mind too, very solid companies in this sector as many of them are under-valuated. Today, Apple for example, is reporting earnings, and they're doing a very good job. I think companies, John, that would present a comprehensive product portfolio, that would present profitability, which is quite rare into the sector, that would show recurring revenue and being asset light. But again and again, profitable companies within the sector will do very well.

Great. I want to ask the 3 of you. What do you think about innovations in SPAC? So I'm thinking of -- I mean, just earlier this week, we had Danny Meyer with something that I think took everyone by surprise. It sounds like a really interesting idea. It might be too early to figure out just how successful it will be, but it's a very interesting idea. And to my mind, it's democratizing the IPO if you can get in the same price as the institutions do. But -- and then, of course, Alan's friend, Eli and Ackman have looked into doing these spin-off things. What do you guys make of that? I mean as you look forward, would you consider doing anything like that? Or do you think keeping a more simple structure is better? I mean as I think Chris said yesterday or somebody did, it's already complicated enough.

John, I'll take it -- I'm sorry, go ahead.

Sorry, no, Raluca, go ahead. I was -- yes. I guess I was going to say taking off of what Chris said a little bit. I think on the front end, I think personally, I do think it's complicated enough, kind of going through the process on the front end for a target company in particular. Having gone through this several times before, it's more familiar to me, but for a target company to understand all the nuances and the rotation of your investors and the PIPE and closing and the whole -- it's kind of complicated enough, you don't need to add another -- an additional layer of complexity to that. Although, again, at the end of the day, if that's the only way to make it a little more complex to get into a good company, one that's profitable in the relatively near term and has scale and all that, maybe it's worthwhile, but that would not be my -- where I would kind of lean to go. I think Chris made the point about that plus the good point where you do want to get creative is what we've already touched on in this panel, is the PIPE market has become a little bit more challenged, how do you get those PIPEs done well with the right investors, the right size, folks that the target company are going to want to having their shareholder base going forward. And it's no longer as easy as it was. For us, again, back in the first deal in ChargePoint when you announce a deal and if it's in the EV space or EV-related space and you see this big pop, well, sure, people are going to sign up all day for a PIPE under that scenario. With that no longer being a case, you really have to think through how do you get the right folks in. I think Ramey mentioned Palantir or other strategic investors on our second SPAC, that's what we thought of more folks who had already invested in the Fidelities of the world, already invested in Bird, would they come in and kind of cornerstone the PIPE was one of the ways we approach it. But I think that's where the creativity lies maybe more on the back end, I'd call it than on the front.

Interesting. Alan, what do you say? Do you think that you like the structure as it is? Or would you consider tweaking it?

Well, I think it depend -- innovation in general, I think, is a really good thing, and markets need to evolve. I believe this is going to be a long-term multi-year asset class. It already has been. But if we talk about this current cohort of SPACs in the last 2 years, I'm a believer that notwithstanding the 500-plus SPACs that are out there right now, that this will continue to gentrify and be a really healthy, vibrant asset class in the alternative space, not unlike what private equity has been as an alternative to other capital sources in the market. So I think it depends on what the nature of the innovation is. And I step back and I'd say, what are the inherent advantages that SPACs bring to the market, and are nuances and structure addressing or detracting from those advantages. So in my mind, the advantages are as follows: it's transparency and the use of projections to tell the story more effectively, investor price discovery, speed-to-market, capital formation and investor curation. And Jim was touching on it in terms of the mutual funds, in particular, coming in through the PIPE, but curating a really strong group of investors. And the ability to tolerate or even facilitate complexity such as accommodating an acquisition or a merger between 2 companies as part of the transaction. So I look at like yesterday's announcement with Pandera and I don't -- my own sense, just it's early days on that deal, it's not even 24 hours. But I think it's not really accommodating any of those inherent advantages, and it may be detracting from some. So I agree with Jim. I think the PIPE market needs to be addressed because it's a bit broken right now. How do we get the mutual funds and maybe strategic investors back into the PIPE market? How do we get retail investors comfortable that this is an asset class they want to be invested in long term, which I think plays it to some of the issues we've talked about with the SEC and their domain? And then lastly, how do we take some of the volatility out of the marketplace? Because like the DWAC is an extreme example of volatility in the market post-announcement. And I think volatility in this case is bad because it leads to more trading-type mentality and behavior to take advantage of the all-around options more broadly. So I think we need to move towards healthier innovations, and jury is still out. I do think what Eli and the Eagle team were looking to do with their spinning structure and Ackman is a variation on that, the ability -- so long as investors have control, and in this case, have the ability to opt in, opt out of the spins, I think that's a really interesting structure and things like that should facilitate the market. It keeps SPACs out there, it avoid sponsors having to go back and reboot all the time. So something along those lines, I think, done correctly, could be quite good.

All right. That's great. I can keep talking about this with you 3 for another hour here, but we've got to -- we can't neglect Kevin, Phil and Ihor here. So I'm going to shift this over to Kevin. Kevin, thank you for joining today. We've had some of your colleagues on, but thanks for joining us for the first time. Kevin, I've got a few things I wanted to discuss, but did anyone say anything that sparked any response that you want to make? I think that's people touching some of the topics you and I wanted to dig into, but I want to give you a shot.

Well, the first thing I respect when they hire, they always do their profile. They want to know who owns the stock, what percent retail is, what percent foreign, how many arms are into the stock. So total profile because the profile will determine everything. So if you're a, say, a 50% retail, like Jim was, that is a big issue, a big problem because the problem is that retail do not vote, okay, unless you really have an all-out program to go after them. So like you do a mailing every other day to the retail holders. So the problem with retail is that 80 -- 70% to 80% of retail own less than 100 shares of stock. So it's only the 20% that you're really focused on that have all the votes. Also, you get tremendous turnover in retail. So they might be in and out within 2 days. So what we try to do is when we look at the profile, we try to set a record date that's close to when the meeting date is going to be because if you pull it too early, then all of the -- all the retail, they're all long gone, and they don't want -- we call it empty voting, so we don't vote. So that's where our surveillance, that's what they keep looking at who owns the stock and how is it changing every week because that's what we're looking at.

That's great. Now there's something else we talked about yesterday. Now be nice to Eklavya here, but let's talk about listing rules at Nasdaq and NYSE. Is that -- can that be complicated and difficult to navigate?

Yes, it's very complicated. I have so many calls every week just on Nasdaq listing requirements. What are they? The ideal profile is if you have 10% to 15% retail because that means you could have 1,500 to 2,000 shareholders, a lot of retail, which is great for listing. But if they don't, as I say, they have, say, 700 shareholders, but when you go through the redemptions, as Nasdaq wants to see how many accounts are redeeming, then they could fall below the 300 count, and that turns out to be a big problem. So -- and they can't get the deals done unless they're listed on Nasdaq. And then so it's conflict -- the rules are complicated. So they call us, we get on the phone and we try to figure out what the rules are, what Nasdaq want, when they want it, depends what type of merger it is. Sometimes they want it before the closing, sometimes they want it after the closing. So it's never easy. And because all the law firms -- it is very confusing.

Got you. Now let's talk about DWAC again for a moment here, which Alan touched on briefly there. When you and I were speaking yesterday, you were saying that the retail presence in that stock could be way north of 50%. How hard does that mean it would be to actually close the deal given that a lot of these people don't vote or don't even know -- don't know how.

Well, it's -- you can't get the deal close. It just -- it takes an average SPAC meeting might be 2 to 3 weeks after mailing. But if you have 50%, 60% retail, then you might have to have 6 weeks or even 7 weeks, which is constant and I mean constant e-mails to these people trying to get them to vote because if they're all at Robinhood or -- it's just tough to vote because they get -- maybe on average 20%, 30% will vote unless you really go after them. So it could be a huge issue.

John, can I ask a question, just quickly, didn't want to disrupt anything, but it's on this topic?

Yes, sure.

Is there any view, Kevin, that Robinhood and the platform should be facilitating that process for the group of investors that hold the particular stock or security that they're voting on versus having it just be the responsibility of the individual beneficial owner?

Well, like Robinhood, they use Mediant. So Mediant actually does all the mailing. Robinhood doesn't contact them directly. Everything comes through Mediant. So Mediant -- will send e-mails out through Mediant or Broadridge. And then the votes will come in through Broadridge or Mediant. They don't actually come in through Robinhood. And now -- and then Robinhood, I guess, they bought Say. And then Say is -- we're working with them trying to figure out how we can use them because they're a communications company and to go after retail shareholders because this is -- one thing we could say, well, maybe here's another solution to deal with retail. So we're working with them. We haven't figured it out yet, but we're -- maybe in the next 6 months.

Hey, John, not to get us too far down a path here, and I'm sorry I had to step away for a second, if you already covered this. But as we talk about retail, I mean the dynamics with retail coming in, again, this kind of feeds into the whole issue, the pluses and minuses, they increase the volatility. A lot of retail comes kind of in and out of a stock. One thing that we had to work on with ChargePoint is trying to motivate somebody to vote who no longer holds the shares, right? So you may have held, as a retail investor, a small number of shares. Again, the record date was 2 months ago, you held them for 5 days after the record date. You've since traded out of those and traded kind of that capital another 20 times, who knows? And now we need to kind of figure out how to reach them and motivate them to go vote the shares that they no longer have an interest in. It's just an interesting dynamic that, yes, if you're not keyed in on it, I'm sure Kevin -- I know Kevin and his team are, I mean, you really have to have a game plan in place when retail comes into the stock in a big way.

And what we've been doing, we've been doing fireside chats with the CEO of both companies. That's been very effective as well. So some of the big ones -- when we had 350,000 retail shareholders, but we did get the vote pretty -- we got it great. It was -- I was surprised how well it went. But they went all out fireside chats the whole bit, and it worked fine.

Has it gotten any easier over time? Let's just say that -- let's just say that Jim, we're in the situation he was in, in January, whenever that was, is it any easier today after several months? Because there's been so much attention and effort put into this, right, Kevin? Or is it still just as challenging as it was?

It's always challenging. Everything depends on your profile. So once we know the profile, then we put the program together. And if we need more time, we go for 4 to 5 weeks. And -- but now we know all the programs are put in place. So the phone calls, the fireside chats, these -- we do the websites to answer all their questions, and it works. So we know what works. And so we start day 1, and then we'll work a lot with ICR as ICR will put out the press releases, they'll do Twitter. So we do everything possible to get the message out there to get these guys to vote and it works.

34,000 retail investors in Lightning eMotors, we closed in 2.5 weeks, 3 weeks. So I agree with Kevin. It can be very smooth and straightforward.

That's a really interesting data point. Phil, we're going to come to you pretty soon here. And Kevin, just hang tight. We're going to put you on a little mini panel, then we're going to bring everybody together. But let's talk to Ihor here. Ihor, sorry to make you wait so long, but it's your turn to take the stage. So Ihor, of course, is the short interest in Maestro at S3 overseas analytics there. So Ihor, tell us a little bit about some of the action that we've seen. We put up that slide in the beginning. We can show it again maybe for a second here, if we could, Jarrett. And tell us what we're looking at here, Ihor. And also tell us a little bit about how you guys arrive at your numbers versus the numbers of the company exchanges.

Right. One thing we saw was a lot of questions from both hedge funds, long on lease brokers on SPAC short selling. There is no SPAC geek, there is no SPAC sector anywhere. So we created one for ourselves since our clients can actually have insight into the whole market. SPAC short interest during the first part of the year, topping out in May at around $3.5 billion worth of short interest. So it's really an important thing. It seems like the more SPACs were retail-oriented, had a lot of retail holdings, the volatility was up, pricing way up over $10. You see had a lot of short selling in the names, and everyone wants to know what was going on in the SPACs. Right now, we were starting to get up again. We were at $800 million last month, we're up to $1.1 billion this month. Top 2 shorts are Altimeter and DWAC. And you can see out of the top 4 most shorted SPACs, they're all over $10. There's a lot of retail interest in these names and the volatility is high. You can see also that a lot of limitations on these shorts, and this is kind of what some of our long-only guys are looking at is aren't more people going to short the stock. Well, as you can see in AGC and DWAC, it's not so much because you've got a high short in terms of flow and really high stock loan fees, which means you're just not going to have that much short interest growing because there's just not that much stock to borrow. One of the points, we have a lot of retail shareholders, retail shareholders don't lend. They're not in margin accounts, they're not in lending programs. So it just means that the total pool of lending assets are much, much smaller if a SPAC becomes a retail -- retail owned SPAC.

And Ihor, have we seen -- I'm thinking DWAC is the one that's coming to mind here. Anything resembling the GameStop tug of war between hedge funds that are short and retail guys getting -- gathering at Reddit and saying, we're going to take down the hedge funds and try to squeeze them. Have you seen that happening in SPACs at all?

Yes. You had a couple of names earlier in the year that had a little bit of that interest, [indiscernible] capital, 4 social capital, 5 IPOE. They were names that we saw some interest in the meme Reddit WallStreetBets world, where you had some guys kind of chatting these names up. And right now, you've got DWAC. DWAC is the king of meme -- meme stocks right now. The interesting thing is, again, less stock available to borrow, stock price shot up. We saw a big risk -- squeeze risk in the name because the stock price not so much and the shorts were getting clobbered. Recently, stock prices kind of retreated a little bit. Squeeze risk has gone down. That's one of the metrics that we created was a crowded and squeeze risk. Again, something that our long and hedge fund clients were looking for in the SPAC market, say, is a SPAC crowded on the short side. Because we all know what's happening on the long side. We really don't know what's going on in the short side because we only get that information once every 2 weeks on a really delayed basis and our algorithms -- and we produce a number on a daily basis. So we're really giving transparency and numbers to people that are interested both on the long and short side. You don't have to be just a short seller to care what's going on in the short side of the market.

Great. Great. Now stay there, but -- that's a good thing to bring up with Phil, actually that I wasn't planning on asking about. But Phil, do you have clients -- and by the way, Phil is a partner at ICR, a friend of the program, friend of IPO Edge. Thanks for being here, Phil. Do you have clients who talk to you about short attacks who are concerned that something like this might be happening? Maybe -- and this doesn't have to do with SPACs, but I would prefer if can you weigh -- I'm sending you the combo with SPACs.

Yes. I think it's definitely a conversation. We see it more post the de-SPAC transaction. It's when the real concern or interest is around potential short attacks. So I think when you are in that de-SPAC period, it's a little bit just different from a share price action. But once you are fully traded, regular-way trading, that's when it tends to be a little bit more on the short side. And it's definitely an area of concern. We spend a lot of time speaking with clients see monitoring that short interest that Ihor talks about. And again, the data is not always that great. But as you see that short interest increase and sometimes you may not get a good census to that something is coming. And when that short attack hits, you have a relatively newly public company that is then scrambling and looking to be able to respond. So we do spend a lot of time thinking about and then also responding to short attacks.

Great. I'm going to let Jarrett pick this up with you. But before I do, Phil, have you heard anything because you did chime in earlier, and I didn't let you talk. But you heard anything else you wanted to respond to because it's been an hour of very dense content here. Did anything jump that you want to respond to?

I mean I think the big things that we're seeing is definitely from the sponsoring company side, a big focus on redemptions. The -- and also the kind of the PIPE market, the challenges that are in the PIPE market. So those are 2 big themes and trends that we're seeing and something that we'll talk -- that you talked about earlier and we'll talk more with Jarrett about is trying to speak to the retail investor, some of the pros and cons of that. But I would say from our seat, we're definitely seeing the volatility within the market. SPACs opened up a lot of IPOs earlier in the year. There's no kind of, what, quiet. Relatively speaking, it was still a very elevated level relative to historical number of IPOs in the SPAC space. So there's just a lot of deals that are -- a lot of companies searching for deals still. So I'd say that the focus on redemptions and the focus on trying to fix that PIPE market and get in the capital recycle.

Great. And Jarrett, I'm going to pass it back to you here, and you can carry on with Phil for a minute.

Thanks, John. Phil, short of getting Elon Musk to retweet something, what do you tell clients when they're like, "I want to be big on Reddit."

Well, we always say like, okay, what are you trying -- we answer their question with a question is, what are you trying to accomplish. And Reddit is a very effective way of reaching retail investors, and that's typically what we ultimately will hear from clients and from the other advisers is like, okay, Reddit is just a shorthand for can we get more retail interest? So we look at it and say that Reddit is -- the ones that become the meme stock level, there's usually some sort of structural issue that Ihor had talked about from a short perspective. And then there is that, as John mentioned, kind of saying, hey, can we team up here and kind of go after some of the hedge funds that may be short of the stock or whatever the case is. But Reddit has a great following. It's a great way of reaching retail investors. But we always say to clients, like, look, if you want to go out there and do an AskMeAnything on Reddit, you better make sure that you have a following there. It's kind of like throwing a party and nobody is showing up. So it's a great platform if there is an ongoing conversation. So we focus and say, look, if you're interest is getting more retail, we think that there are other ways of going about and doing that. So there are great platforms even if you just think about IPO Edge, it's a great example of a way of reaching a retail investor, the fireside chats that you've done, that others have talked about, Raluca talked about how they've been very effective in reaching retail. So I think that if a client asked us, hey, we want to get big on Reddit. We say what you're really saying is you want to attract more retail investment -- investors. So we're going to say there are a number of other platforms that are out there, and there are some strategies and tactics that we recommend that are going to leverage Benzinga and Yahoo! Finance and Cheddar or SPAC Alpha or Seeking Alpha. So there are a number of great platforms as well as Reddit to be able to get that retail investor.

Thanks. And thanks for that little plug there. Now switching topics just slightly. How important is it when proxy advisers buy against the deal?

It's a great point. I think it's a -- I spent a lot of time advising companies around shareholder activism as well. So I think that the proxy advisers have a pretty big influence in those types of votes or campaigns. I think that what we see with the proxy advisers is they are influential. They're going to come out at the very end of the process. They're issuing their vote recommendation days before a vote. So that recommendation against a deal could cause some challenges or issues. So we say that we need to think about it and know, hey, look, do they -- does ISS or Glass Lewis have a tendency to recommend against deals that are trading below $10, where is our stock trading, right? So we can anticipate and start planning for a negative recommendation. And that planning starts well before that recommendation comes out. So as our clients are going through the de-SPAC process, we're working with the banks, with the advisers. We're marketing throughout the whole de-SPAC process so that shareholder base is turning over. And as Kevin mentioned, working with Kevin and the proxy solicitors, it's important to understand what that shareholder profile looks like and to understand and game out how influential the proxy advisers might be. So if it's -- again, they're advising institutional investors. Kevin and his team are going to look and say, hey, if we get a negative recommendation from ISS, here's what the impact is going to be. Then we had to have a game plan to pick up the phone and have a strategy around how we can get those shareholders to potentially flip their vote and go against it, depending -- if some are auto votes, they're going to -- once the recommendation comes out, they're going to vote. Others are going to use it as part of their decision-making process. So again, working with Kevin and the team to understand that shareholder profile is a big part of then thinking about the strategies and tactics that we're going to develop and implement from a communications perspective.

Jarrett, I see Kevin has got his hand raised there. His virtual hand. Kevin?

I have one comment on this. Just if you're trading below trust, ISS and Glass are going to come out against right across the board. If you're $2, $3, $4 above, they might -- they're going to come out for the deal. So it's -- and then you have the auto vote. So a lot of these institutions actually outsource to ISS to vote. So as soon as they put out the report, which could be, say, a week prior to the meeting, then we're going to see their votes come across immediately. Now we know which ones -- so we're looking at who they are because we're going to be on the phone with them to switch the vote. So most of these guys are pretty good because they realize they outsource to ISS and they're going to switch to vote for. But normally, we try to get a quorum 55% to 60% minimum to account for all the negative votes that might come in. Because in order for the merger to go through, all the proposals have to pass, including with all the negative votes that came in.

And I think it's a great point. I mean, look, the get out the vote effort is going to be situation by situation. And I know that Jim and Raluca have talked about the situations that they've been in with very different shareholder mix during that whole de-SPAC process and marketing of the deal, getting that transition from the more focused investors to the more fundamental shareholders is a key part of the effort that we're doing from an ICR perspective and a marketing perspective than a PR, investor relations elements of it. So now when you do get down to the vote, it's like, okay, great, you've set that record date. Now that is -- those shareholders are the ones that really count. So we need to make sure that we've got a game plan that matches up with what that profile looks like.

Great. I just want to bring this up really quickly because someone touched on it yesterday, but we don't need to spend a lot of time on it. But to what extent can a substantial short interest actually cause problems when it comes to the vote because of the way shares are custodied? Phil or Kevin, one of you, I think, touch on that. Phil?

Yes. I mean I'll let Kevin speak to the mechanics. But I think, ultimately, what happens is when -- if the shares are -- if you have them out on loan, you don't -- you no longer have the vote. So then looking at the shareholder interest is also part of the overall mix that we're going to look at from a vote perspective. And so that's -- I mean, Kevin, I don't know if you want to speak from the mechanics of it. But yes, absolutely, John, that short interest could, if there's -- if it's elevated, could result in some additional challenges because you could be calling on institutional investors and say, hey, look, we have the stock out on loan, we don't actually have the vote.

Great. Sorry, go ahead, Kevin.

And that is a big issue. When you're trading above trust, they lend it out. We had one that had 70% -- 80% of the stock, he owned it. But when Goldman Sachs lent it out, the investor didn't even know that his shares could be loaned out. He was shocked when he found out he couldn't vote. So we look at that and then we look at foreign. So if there are any large foreign possessions, they don't vote either normally. So that's another problem. So shorts, foreign, the ARBs. ARBs start coming in at the last moment.

You also have to realize that every short sale creates a new long. So yes, the original lender, the beneficial owner is not voting, it's not because he doesn't have that right anymore, but the buyer at the other side of the short sale does. So what you're really seeing is a move from institutional, probably more retail hands because it's a daily trading of a SPAC instead of the big block treatment you're seeing on beginning of a SPAC's life or at the end of the SPAC's life. So it's probably going to be much harder just to find those voters. We have something called S3 short [ interest change of ] flow, which actually gives you the amount of true float in the stock so you can tell how many trades -- shares are tradable, but really how many shares are -- as opposed to the true -- the float that the company says they have.

That's a really good point, Ihor. So folks, we've got 15 minutes left. Before we start taking some of these audience questions, do any of you want to weigh in anything that you didn't get a chance to because we tried to structure this, so everyone had to wait their turn. No? Okay.

Actually, I'd like to say one thing.

Sorry, go ahead, Alan.

We haven't talked about what's the key to success for SPACs long term? And my view on that is the SPACs have gone through kind of a hot and cold cycle and need to prove to the markets more generally. This gets back to our SPAC, a 4-letter word. They need to work consistently to win out as a preferred asset class. And I think they're on the short end relative to IPOs, particularly for these PubCo-ready scale businesses. And I worry that the fallout from that will be merging with companies that aren't ready to go public that are of lesser quality. So I think it's important that the asset class reestablish itself and be attractive as an alternative to the IPO and the direct listing for high-quality businesses that are existing or established market leaders, where the SPAC can do its thing and bring certain inherent advantages to the market. There are just not enough deals working right now to make the market -- to sort of reenergize the market and make it healthy. The lack of volume in PIPEs is reflective of that, the lack of mutual funds coming into the market, even on the back end is reflective of that. So I think that's one of the big challenges, but also the opportunity for the next, I don't know, 6 to 9 months as we work through the wall of deals that need to mature and turn out of the market, we'll see. I'd be curious if anybody else has a reaction, but that's top of mind for me.

And I think...

I'm sorry, Phil, really quick. One thing to add to the advantages of SPAC, John, since it hasn't been mentioned before, M&As at the moment of the combination, we did have the experience with 3 of our companies. We had an exercise of 3 M&As, 4 and 6 companies coming together at the moment of the combination. Incredible advantage of the SPAC compared to, obviously, the standard IPO will not provide that advantage. We also have to remember that to Alan's point, many SPACs did not perform up to the expectations, but it is a long-term gain. And there is no rush. We -- at least the GigCapital team is committed to participating in the life of the company and the Board of Directors are helping the executive team beyond the combination time. We're there to stay rather than flip at the moment of the combination.

John, just last point on that. I think everybody needs to remember that SPACs have been around for a long time. But this iteration of SPACs, it's just been 2 years. And so more than half of the companies that have announced and/or closed haven't reported it, quarter yet.

Right.

And so I think it's really important for time will tell and time will prove out as these companies mature and start to -- and continue to engage with investors and actually produce results. Yes, I think that you'll see we hold a positive outcome.

Yes. It's -- I think at ICR, we spend a lot of time with the companies that are -- as they're going through the de-SPAC process saying, hey, look at the end of this process, you are now a publicly traded company. So it is, as Barbara talked about, all the readiness. And we think that 2022 is going to be an interesting year because you've got all those companies, SPACs that IPO-ed in late 2020, early 2021. As they're now looking for deals, you have been the -- as Chris said, the deals that have recently closed, now, as they start to report, and if we've done our job well, working with those companies, setting them up so that they're not tripping out of the gate and that they're having success as a publicly traded company is going to be a big factor in those other ones getting deals done. And look, more SPACs are going to likely fail and not going to be able to find a deal. But I think that might actually be a good thing for the overall market and the overall product.

That's really helpful. There's a question that's popped in here, and I think this is a good one because we all see this. If you look up any SPAC on say, Yahoo! Finance, you're going to -- most of the stories are going to be lawsuits. So what's going on there? And Ramey, I don't think your firm is the kind of shop that files those suits. But to what extent do clients worry about that? And is there a way to avoid all that headache? I mean it looks to me like almost no matter what you get, it's like a strike suit, these happen. It's inevitable. So what do you advise clients about that?

So there's 2 -- there's probably 3 kinds of suits technically. So there's the suit that every SPAC announcement has been getting. Sometimes, the firms file an actual suit usually in New York. Usually, these days, they're just sending a demand letter. But if you look at proxies or F-4s -- or S-4s, you'll see a little statement that says we received the letter, and we think it's without merit, we're defending it. Those are usually just people looking for a quick buck. They realize that they can file these letters, the SPACs and the target company don't want to deal with the hassle of defending it. And so they'll say -- they'll either just ignore it, which is one approach, or they'll throw a bone of some modest disclosure added to the proxy and then deal with paying off the plaintiffs firms post-closing for a modest amount. The real -- the more meaningful suits are the ones that are either brought by the SEC, there's a couple of examples of those, or brought after the closing of the transaction, alleging that there was either a fiduciary duty violation in approving the transaction or more realistically that the disclosure was deficient. That's usually where the company doesn't perform well post-closing relative to the projections. And those can be meaningful. But there's -- I mean, it's hard to advise how to protect against those other than doing a ton of diligence, which is important, but it's almost impossible to protect against the future poor performance of the company. So those -- you get insurance and you make sure you do your diligence and disclose the risk of the investment, and that's kind of the end of it. The proliferation of those, in my view, have not been off-putting to participants, neither SPACs nor target companies are saying, "Oh, I'm not going to do this because there might be a suit." You'd face a similar risk on going public anyway.

That's interesting. Raluca, do you agree with that? And Jim, that this is just kind of -- it's part -- it's cost of doing business, it's going to happen. I mean, you can do all you can, right? And maybe Barbara has a view, but Raluca...

Right. John, so I think Jim Graf asked the question, and I mean he's incredible SPAC sponsor group. I think what it did for us, it just focused us on making sure that the -- we're getting the accuracy of the disclosure to SEC. We're focusing on financial capitalization, valuation and projections. We are doing a ton of due diligence. You also have to pay attention to litigation risks, exactly like Ramey said, and making sure that the listing requirements are there. It will not stop us from anything. We'll do the good job that we're doing and trying to take these companies and get them ready for the public market. I am sure that many of those consult firms that are just copying and pasting the papers from one lawsuit to another will be also under the scrutiny of SEC, like the alignment of incentive of sponsors. But overall, it will not stop us.

Great. Barbara, is this -- sorry, go ahead, Jim.

No, John, since you just asked both of us. Quickly, I won't add too much more, but Raluca really touched on all of it. Yes, it won't deter us at all. I mean, it didn't really change anything fundamentally from how we did our first deal to how we do our second deal to eventually how we do our third deal. But that does involve an extensive amount of diligence -- sorry, involve an extensive amount of diligence as well as real focus as Raluca explained on valuation and projections and what the future profile of the company is going to be. But it's also -- and Ramey alluded to this as well. I mean I ran a public company for a while that eventually merged into another public company, and we were hit with a whole bunch of kind of BS lawsuits as well. I mean I think this is just the life of being a public company. When you go through whether it's an IPO or a merger or a SPAC merger, unfortunately, you're going to deal with these. And as long as you are kind of diligent in your process, you use the right advisers as well, I think it's just kind of -- I hate to say it, but almost like a cost of doing business. It's not going to change us from -- or deter us from doing a deal.

I was just going to say exactly what Jim said. It's just the cost of doing business. It's a cost of being a public company.

All right. And Kevin, you got your hand up there. You're muted there, Kevin.

Yes, some of these lawsuits have caused some of the vote requirements to change. So -- and some of them will only be Class A, which are the public shareholders voting. So if you have a large retail percentage and the sponsor votes can't -- sponsor can't vote, it can be a very difficult vote to get the -- all the proposals passed. So it has created a problem for us where you had 30%, 40% retail and only Class A voted, then it was an issue. If Class A is only down at 10%, not a problem.

Got you. There's another interesting question in here. And actually, Jarrett and I can shed a little light on this. Someone is asking basically, what do you do about Faber and Cramer and a lot of the media is constantly bashing SPACs? Retail investors, I mean, look, this can be a complicated structure and getting your head around it, it's not that it's rocket science, it just takes a little bit of time. But I'm going to tell you guys a dirty little secret. When I was in the Wall Street Journal, I had an editor and he wouldn't let me write a positive story. It was against the rule. I mean so that's part of what people need to understand is that journalists oftentimes confuse objectivity with negativity. And so they just try to find as much bad they can about whatever the topic is. But I mean I think we -- Phil, I mean this is your area. What do have say about that?

Yes. Look, I think that there -- you always have to take the temperature on the morning and see, okay, what are they tweeting or what are they saying that day. And they do ebb and flow as far as their kind of commentary around the structure. Where we focus is saying, look, yes, it's a very powerful platform, a CNBC or Bloomberg TV. But it's just part of an overall mix of telling that story. And there are other platforms that we think are equally as valuable. But when you're talking about a negative element from Jim Cramer or David Faber, there are the positive sides of the 2, right? So it is -- look, when your stock is being talked about, there are good things. It's almost like in politics, there's no such thing as bad press. So when it's out there, it's something that is getting some coverage. And look, that's what the -- as you said, your editor said you got to write a story that's got some negative angle to it, right? And we tell clients all the time, the -- all the positive is actually -- that's called advertising, not media coverage, right? So maybe you're not going to get something that's just going to say exactly what you want every time. But it is the overall mix of getting out and telling that story. And at the end of the day, at the heart of this is you have to have a compelling investment thesis, whether you're a pre-revenue company, a cash flowing business, whatever the case is, you have to have a compelling story with a great investment thesis that's going to speak to a particular investor audience.

I think it's a really good explanation. And I think as Alan said, there needs to be more proof of concept, a little more time needs to pass when you need more success. And I would imagine that with that would come perhaps improvement in reputation. Let's see, we're almost out of time here, but was there something -- Jarrett, I think that we -- there was something we may have not spent enough time on. There's a question here about PIPEs. I mean, Chris, I think yesterday, you talked about this, this is what I was trying to think of. You were saying that if you go back not that long ago, PIPEs were not part of the equation, right? And now -- so the -- and then there was a time when every deal had a PIPE on announcement. So how do you see that shaking out now? And I think you also mentioned yesterday that some of these PIPEs aren't exactly true PIPEs in your mind.

Yes. Look, I mean, the first few iterations of this product, PIPEs, were not sort of commonplace. The SPAC would sign an LOI with a company, they would announce the transaction and the dollars that were in trust were effectively the IPO, and you hope it trades up and you have no redemptions. The PIPE came into fruition sort of maybe 18 months ago really in earnest because that was -- there was sort of a flaw with respect to that structure. If you didn't have validation of a valuation that's agreed to between the SPAC and the company, if you didn't have that validation from third-party investors, financial investors, those who -- the same investors who are effectively determining the outcome of a traditional IPO, it's hard to say that, that company is going into the public markets with their eyes wide open and potentially at the right valuation. So despite all of the bankers and firms like myself doing the work around valuation and looking at comparables and figuring out where to try to price things appropriately, it's really the investors that are investing significant amounts of capital, institutional and retail who are going to validate that valuation and the PIPE became this really important thing that was needed. Because of this technical -- slight technical dislocation in the market right now, where when you announce a deal, not everything is trading up like it was in Q1 and PIPE investors are sort of -- we wrote, I don't know, close to $75 billion worth of PIPE capital that came into the market this year. That is a lot of capital that is not freely tradable. And that got to a level that was, I'd argue a little bit scary for investors. And they didn't recognize at that time maybe or appreciate that when you sign a subscription agreement, you announce a transaction, you got like 5 months between when you actually have potential liquidity on that. Then a lot happens between that period of time, right? Stocks come down in the comp set, but you're still set at a valuation. So a lot of things can change, which is why I said, the true IPO is at the time of the close. But look, PIPEs are going to be around. We had 6 PIPEs for 7 deals announced this week, right? And many of them actually did have financial investors who had sort of disappeared for a while. Now they're starting to come back a little bit. I do think there -- it's going to continue to be more challenging than it was in the first half of this year just because of the technical aspect of it. But again, I think you're not going to see a return to no PIPEs for all these deals. But I do think that there will be more creative structures, not necessarily always having common stock PIPEs done at $10, maybe there is an aspect of a convertible feature, which we see in regular-way IPOs as well, crossover rounds, creative ways to, as Jim pointed out, finance the transactions, I think, going forward.

Sometimes, the real IPO is in the follow-on after the combination when some of the fundamental investors are participating in equity more than yield investors.

All right. Well, I think Raluca's going to have the last word because it's after 3:30. I really enjoyed this. I think this is my favorite SPAC to the Future event so far this year. So thanks, everyone, for joining. And just one last thought is, remember, if you want to watch the replay as a couple of you have e-mailed me about, it will be up on the website in about an hour. Thank you, all the panelists and everyone who watched today. That was terrific. Everyone, have a great afternoon.

Thank you so much.

Thanks, John.