SPACS

SPACs Were Retail Investors’ Favorite Way To Invest In New Companies. Then, They Vanished.

Special purpose acquisition companies (SPACs) were once hailed for their opportunity to level the playing field, but the only thing they’ve leveled is the financials of retail investors. Their fervor was a blip in Wall Street history, but their losses are historic — and ongoing.

No Buffett: From 2020 to 2022, SPACs made up half of new Wall Street entrants. However, the trend has fizzled today, and its kingmakers are no more. Notably, Chamath Palihapitiya, known for kickstarting SPAC mania by taking Virgin Galactic ($SPCE) public in 2019, and other celebrity endorsements have faded. Last year, 40% of new SPACs failed to find a target, while at least 21 former SPAC targets went bankrupt, erasing over $46B in shareholder value.

• This year, only a handful of high-profile companies like nuclear power firm Oklo ($OKLO) and Lionsgate Studios ($LGF.B) have merged with SPACs.

• Halfway through the year, there have been just 15 SPAC initial public offerings (IPOs) — a far cry from the 248 and 613 in 2020 and 2021, respectively.

Where are the SPAC Success Stories?

While many SPACs have struggled to stay public, with companies like Virgin Galactic conducting a reverse split last month to remain compliant, some SPACs have outperformed the market. Among the few are companies like construction leader Primoris ($PRIM), data center firm Vertiv ($VRT), and gambling giant DraftKings ($DKNG). And interestingly, a SPAC has emerged as one of the most active stocks this year:

• Donald Trump’s Trump Media ($DJT), which merged with a SPAC in January, has seen its shares more than double this year since completing its merger.

• However, the Truth Social owner is down 45% from its all-time high — with its trading and valuation described by LinkedIn’s Reid Hoffman as “wildly high” and “absurdly out of the realm of normal.”

The comeback no one asked for: With the resurgence in memecoin trading and the popularity of $DJT, analysts are speculating about a potential comeback for SPACs on Wall Street. Bloomberg reports that SPACs have raised $888M in the last three months — and even seasoned SPAC investor Michael Klein has reentered the arena, alongside OpenAI’s Sam Altman toying with their potential. But buyers, beware, SPAC sponsors get paid regardless of whether you make money or not.

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LARGECAP RECAP

🏢 Meet the Company Behind Your Aggressive Rent Hikes

For the 52% of Americans who rent, there’s nothing worse than receiving your renewal notice with a rent increase — especially when those hikes exceed inflation rates, a trend that has become more common since the pandemic. The culprit? Allegedly, it’s a piece of software advising your landlord to do so. RealPage, utilized by many of America’s largest landlords to help recommend rent prices, is implicated in driving up rents across the nation.

• RealPage’s algorithm influences over 16M rental units, reportedly advising landlords to raise rents and accept higher vacancy rates for increased profits.

• According to The American Prospect, this has led to apartment rents rising “between 50-80% over the past seven years in markets where the software is employed.”

Where the buck stops: RealPage insists landlords accept less than half of its rent recommendations. However, this hasn’t stopped investigations by attorney generals in 10 states and at least one class action lawsuit alleging the software price-fixes rents. And making matters more colorful, the FBI recently raided one of RealPage’s largest clients, seeking information on the software’s use. We’ll have to see if RealPage lives to hike rents another day.

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Markets & Economy

Paramount ($PARA) to raise streaming cost: After rejecting a merger deal with David Ellison’s Skydance, the streaming giant announced a price increase for Paramount+ by $1 to $2 per month. The company’s stock is down 29% YTD. [Read]

How interest rates affect time in the market: Millions of Americans are keeping their cash in cash for longer, taking advantage of generational record interest rates — but they risk missing the opportunity to buy other assets before the market declines. [Read]

Consumer dashboard shows mixed data: Goldman Sachs ($GS) released the latest version of its US consumer dashboard, revealing mixed data on debt, consumer spending, and economic growth. [Read]

Business & Wealth

Apple ($AAPL) shelved Meta ($META) AI partnership: The WSJ reported that Apple and Meta had entered talks to integrate Meta’s AI software on Apple devices, but a new report by TechCrunch alleges that privacy concerns led Apple to reject the deal. [Read]

Lufthansa ($DLAKY) adds environmental surcharge: To comply with Europe’s aggressive ecological regulations, the German airline will add an “environmental cost surcharge” of $1 to $72 on some fares. [Read]

Judges block parts of Biden student loan plan: Two federal judges blocked changes to the Department of Education’s income-driven repayment plan, SAVE, which would have cut participants’ payments in half starting Jul. 1. [Read]

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DIGIT OF THE DAY

Fertility Rates Have Fallen By Nearly Half Over The Past 60 Years

Parenthood is the scariest hood you’ll go through, so some are avoiding the neighborhood altogether. According to a new report from the Organisation for Economic Co-operation and Development (OECD), fertility rates have dropped from 3.3 children per woman in 1960 to 1.5 in 2022. This is far below the replacement rate of 2.1, needed to maintain the population without migration. Except for Denmark, fertility rates have fallen across all OECD countries since 1980. And women are having children later — and in many cases, not at all.

• Between 1980-2022, the average age at childbirth rose from 27 to 30.9.

• The percentage of women remaining childless “increased markedly,” with Italy, Spain, and Japan seeing their rates double between the 1955 and 1975 cohorts.

Choice or circumstance? The decline in fertility rates has coincided with a dramatic rise in the cost of raising children in recent years, from when they enter the nest to when they leave. Daycare costs have jumped nearly 36% over the last ten years, outpacing inflation. According to the Federal Reserve Bank of St. Louis, education costs have also risen faster than the Consumer Price Index for decades. And even when they leave the nest, if ever, 59% of young adults are receiving financial help from their parents, according to Pew Research — while the share of young adults aged 20-29 living with their parents has also increased from 45% to 50%.