Explaining SPACS and why Juul is the perfect target
Let's continue the conversation down here. Who's crazy enough to SPAC Juul?
It can’t be Bill Ackman. First, Tontine isn’t receiving founders’ shares, so his downside is not as protected as a normal SPAC sponsor’s would be. Second, his board, including Michael Ovitz, has too much to lose from an association with Juul. Third, it feels like Ackman is trying to prove something with Tontine - that SPACs are a better way to go public. He can’t risk his mission on Juul.
I had a whole section written on why Chamath Palihapitiya’s $700mm Social Capital Hedosophia Holdings II should acquire Juul if Chamath believed that Juul was actually a healthy alternative to smoking and could save lives. Social Capital’s mission is to advance humanity by solving the world’s hardest problems, and smoking is the number one cause of preventable death in the world, responsible for over 7 million deaths annually. Chamath is just the kind of outspoken investor with fuck you money to be able to fight for Juul publicly if he believed that they were getting an unfair deal. Then I found this video:
"About a third of kids in middle school are vaping. If it’s true, you gotta put these fucking companies out of business. Put them into the goddamn ground."
Doesn’t sound like Chamath is a fan of the company.
With today’s two biggest names in SPACs out, we’ll need to look elsewhere.
What about Carl Icahn? The activist investor has made money on tobacco companies twice - first with RJR Nabisco in 1997 and then with KT&G, the dominant Korean tobacco company in 2006. He publicly beat Ackman on Herbalife, might he try to do it again on the SPAC battlefield? Plus, Icahn recently lost $2 billion on Hertz, dumping before the WSB crowd came in. Maybe.
I hate myself for saying this, but... Barstool Sports’ Dave Portnoy actually makes a lot of sense. Portnoy is worth over $100 million, livestreams himself day trading, talks shit on Warren Buffett, and could unleash his army of millions of followers on the deal. He would likely need a financial partner to attract institutional money, but is it crazy to think that he could raise the SPAC exclusively from retail traders? Don’t underestimate Davey Day Trader. He just interviewed the President. Unlike a serious Sponsor, Portnoy wouldn’t even care if the deal fails. It would only bolster his following. The downside here, though, is that an alliance with Portnoy would likely exacerbate regulatory concerns. Juul needs a Sponsor with a strong enough reputation to help them navigate the regulatory maze.
Packy - while he won’t be after Juul, this sure does reinforce we’re in the year of the SPAC: https://www.axios.com/billy-beane-spac-ipo-92243c4c-3125-436b-888f-cbe4ef1f9be9.html
Great work as always.