Charlie Munger, Berkshire Hathaway vice-chairman, and Warren Buffett’s right hand blasted SPACs. On Wednesday, Munger said in the Daily Journal annual meeting that the “world would be better off ” without them adding that the SPAC era “must end badly,” whenever it will happen.
“Crazy speculation in enterprises not even found or picked out yet is a sign of an irritating bubble. The investment banking profession will sell sh-t as long as sh-t can be sold.” Munger said.
SPACs a mnemonic for special purpose acquisition companies, or blank check companies are Shell Corporations listed on stock exchanges. However, SPACs acquire private companies directly, instead of going through the process of initial public offering (IPO). That said, traders are at risk of losing money since they don’t know what that particular SPAC they invested in will be buying.
In 2020, it took at least 10 months to reach the 130 SPAC mark. However, it only took 2 months in 2021 to reach 133 SPACs. Additionally, the 133 SPACs raised around $40 billion on the U.S. stock markets. The growing trend of SPACs raised an alarm among investors and traders. However, other billionaires have different opinions.
