Podcast Summary: Slate Money – "Are SPACs Scams?"

Date: June 5, 2021
Host: Felix Salmon with Stacy-Marie Ishmael, Emily Peck
Special Guest: Charles Duhigg (journalist, New Yorker contributor)

Episode Overview

This episode explores the hot topic of SPACs (Special Purpose Acquisition Companies) and whether they function as scams, especially in light of financial maneuvers by high-profile figures like Bill Ackman and Chamath Palihapitiya. The conversation also touches on meme stocks (like AMC), the evolving nature of retail investing, the complexities of returning to the office post-pandemic, commuting's impact on wellbeing, and the role of storytelling in the financial sector. Charles Duhigg joins midway to offer insights from his New Yorker piece about Chamath and SPACs.

Key Discussion Points & Insights

1. Meme Stocks & the AMC Phenomenon

• Overview: AMC, the current "meme stock," has seen wild trading activity, fueled by retail investor enthusiasm similar to earlier GameStop mania.
• Company Response: Unlike other companies, AMC has embraced the meme stock status, offering novel incentives (like free popcorn) to investors and issuing significant new stock to take advantage of retail demand.
  • "They are attempting to incentivize folks to buy their shares with offers of free large popcorn. I think it's only one free large popcorn, which does not seem to be a great ROI." – Stacey-Marie Ishmael [02:16]
• Market Dynamics: Despite expectations of a pump-and-dump, stock prices like GameStop and AMC remain at elevated levels months after initial spikes, challenging conventional wisdom about retail investor losses.
  • "What everyone thought was this pump and dump scheme... turned out in fact not to happen. The losses might yet happen... but the level of these stocks has remained elevated for much, much longer than anyone thought possible." – Felix Salmon [04:01]
• Impact: AMC managed to avoid bankruptcy by raising $900 million from retail investors.
• Broader Analysis: The meme stock trend seems partly fueled by nostalgia – millennial and Gen Z investors backing companies that matter to their youth.

2. Return to Office, Hybrid Work, and Commuting

• The Debate: Should people return to the office full time? There's growing evidence of workers quitting rather than going back, and concerns about "promotion inequality" if only some are present in-person.
  • "If you are an ambitious young professional and you want to get promoted... you're much more likely to achieve that dream if you go into the office." – Felix Salmon [11:00]
• Management Paradigms: Old metrics of presenteeism persist, frustrating many workers. Talent management strategies have not caught up with distributed or remote work models.
• Commuting's Mixed Blessings: Commutes can offer "cleansing brain space" for some, but for most, it's an exhausting and unhealthy slog due to poor U.S. infrastructure.
• Work-Life Boundaries: The pandemic erased many boundaries; remote work stretches the day, and there's less excuse to disconnect.
  • "Your workday just expanded to fill the space that had previously been given to commuting..." – Stacey-Marie Ishmael [20:28]
• Class Dimensions: Only ~16% of workers have the option to work from home; flexibility is a "rich people problem" not available to all.

3. SPACs – Structure, Hype, and Scams

• What are SPACs? Blank-check companies that raise money to acquire or merge with a private company, bringing it public outside a traditional IPO.
• Chamath Palihapitiya’s Role: A prominent SPAC promoter, profiled in a New Yorker piece by guest Charles Duhigg, embodies the “storyteller” phenomenon in modern finance.
  • "The Chamath story is much bigger than spacs. The Chamath story is really a meta story about... stories and storytelling..." – Felix Salmon [27:15]
• History Repeats: Duhigg traces parallels to past eras (mutual funds in the 1920s, junk bonds in the 1980s), outlining how "storytellers" drive speculative manias.
• Are SPACs Scams?
  • 20% of SPAC equity typically goes to sponsors for free, a setup almost guaranteed to enrich insiders at the expense of retail investors.
    • "Any retail investor who buys into a SPAC after it's gone public... you are asking to lose money." – Charles Duhigg [37:42]
  • Economic terms are improving with scrutiny (e.g., Bill Ackman’s SPAC is less abusive), but most SPACs exploit storytelling and celebrity to attract unsophisticated investors.
  • Quote: "It doesn't matter, [the sponsor] gets paid whether there's a bunch of people to buy it or not." – Charles Duhigg [37:42]
  • Celebrity SPACs use star power (Jay-Z, Shaq) to get attention and lure companies and investors, even if the underlying economics are dubious.

4. Finance as Storytelling

• Media & Markets: The explosion of attention-based investing hinges on compelling characters (“storytellers”) rather than financial fundamentals.
  • "Financial instruments are boring... So storytelling really is important. If you want people to... sell your stuff, you have to make it way less boring." – Emily Peck [42:18]
• Systemic Risks: The panel agrees finance should be boring—but notes how it quickly becomes dangerous (or innovative) when storytellers drive the narrative, pointing to both real successes and massive failures (e.g., Long-Term Capital Management, Elizabeth Holmes).

Notable Quotes & Memorable Moments

• On Meme Stock Paradox:

  • "The level of these stocks has remained elevated for much, much longer than anyone thought possible." – Felix Salmon [04:01]

• On AMC’s Unconventional Strategy:

  • "You want to buy some shares? Here's some shares. So they have issued additional common stock. They are attempting to incentivize folks to buy their shares with offers of free large popcorn." – Stacey-Marie Ishmael [01:55–02:16]

• On SPAC Economics:

  • "Any retail investor who buys into a SPAC after it's gone public... you are asking to lose money. 20% of the SPAC is given to the sponsors... for free." – Charles Duhigg [37:42–38:15]

• On Finance and Storytelling:

  • "The Chamath story is really a meta story about stories and storytelling and how this very financialized world that we used to live in has... become a throwback to [just] listening to storytellers and throwing lots of money at them." – Felix Salmon [27:15]

Important Segment Timestamps

• 00:42–02:57: Meme Stocks – What is happening with AMC and retail trading
• 06:19–09:04: Democratization of capital markets and meme stocks as nostalgia plays
• 10:08–14:40: Return to office, hybrid work, and commute experiences post-pandemic
• 15:23–16:26: Class divides in who gets to work from home
• 25:12–27:16: Introduction of SPACs segment, setting up the Chamath/Charles Duhigg interview
• 27:15–30:32: Storytelling in finance – Chamath as a financial "storyteller"
• 37:42–39:11: Are SPACs scams? SPAC economics and why most are bad for retail
• 41:00–42:18: Celebrities and storytelling in SPAC promotion
• 45:41–48:50: Numbers round (fun facts about United Airlines, AIDS, Krispy Kreme)

Tone & Language

• Conversational and humorous, yet critical and incisive
• Mix of skepticism (especially around financial hype and SPACs), curiosity, and acknowledgment of broader socioeconomic trends
• Occasional playful ribbing among hosts (e.g., about generational divides, favorite commutes, donuts)

Summary Takeaways

• Meme stock trading is reshaping equity markets and company fortunes, driven by retail enthusiasm—and, oddly, has proven more durable than critics expected.
• The return to office highlights persistent inequities and infrastructure failures; meanwhile, work-from-home is both liberating and boundary-blurring.
• SPACs, hyped by slick storytellers and celebrities, are mostly structured to benefit insiders—presenting serious risks for everyday investors.
• Throughout, the hosts emphasize skepticism, noting that whenever finance becomes "exciting" through narrative, it's a warning sign: real investing success, they argue, is usually boring.