 The Sharpe Angle: Atreides' Gavin Baker How the retail investor is winning the year and the future of SPACs  SPAC activity all but ground to a halt in recent months after insatiable activity during the fourth quarter of 2020 and into the first quarter of 2021. An SEC clampdown and other regulatory concerns are partially responsible for the slowdown. But there may be a lesser known reason, according to Atreides Management CIO Gavin Baker. Here's Baker in the latest Sharpe Angle conversation for Delivering Alpha on SPACs and more, including how the retail investor is winning 2021. Leslie Picker: So you believe that some of these changes to how many of these SPAC mergers are financed is really what's to blame here, and no one's really talking about this? Gavin Baker: In my mind, there's three kinds of SPACs. There's, I would say, unserious SPACs, you know, sometimes you have celebrity sponsors. There's unscrupulous SPACs that I think were preying upon retail investors and were highly concentrated in the EV SPAC area. And then I think there's a third category of very, very serious SPACs, and these are being sponsored by really high quality — your premier venture capital growth equity hedge fund firms, or, very sophisticated operators who can kind of add value to their target companies. And for that third category of SPACs, where we've been a very active participant in the PIPEs, it's important to realize that what drives that market is the PIPE. This is the money that is raised after the SPAC finds a target. And the reason that's essential is the only way a SPAC can be competitive with an IPO or a direct listing, as a path to going public for high quality company, is to have a PIPE that is at least 2x and realistically probably 3x larger than the SPAC itself, because that blends down to kind of the SPAC sponsors 20% effective fee….And this is actually why amongst these high quality sponsors, the axis of competition has really shifted to those who are willing not only to kind of whether it's defer their fee, lock their fee up, have it aligned with the performance of the underlying target over time. But more importantly, sponsors who commit to put their own money into the PIPE, because it de-risks that process for high quality companies. But this third category SPAC, which I think is here to stay, this is temporarily frozen. And the reason is, towards the beginning of this year, I think accountants, attorneys, CFOs, and a lot of different funds looked at PIPE commitments and said, "You know what, these are now material. These are relevant and we should classify them as illiquid investments." And that mattered a lot, because a lot of funds have internal limits on the percentage of their capital that they can have in illiquid investment, whether it's a PIPE commitment or a venture growth equity investment, and a lot of funds were all of a sudden over their commitments. And that really froze the market, along with the fact that 70% of SPACs are trading at $10.50 or less which is not a great outcome. And I think, as that kind of pig of PIPE commitments works its way through the proverbial python, you will see the market loosen up and probably more high quality companies continue to access the public markets via that, that third, SPAC route.
SPAC lawsuits jump in another sign of suspect dealmaking for the once red-hot space SPACs are getting hit by a rising number of class-action lawsuits as more hyped-up deals turn out to be flops. Shareholder lawsuits against post-merger SPACs rose to 15 through the first half of 2021, tripling from just five cases in all of 2020, according to data from Woodruff Sawyer. The jump in the segment came even as overall securities cases fell 13% this year. 
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Howard Marks says valuation is 'ultra-high' but makes sense Investor Howard Marks believe today's sky-high stock prices are not a sign of a bubble because of ultra-low interest rates and the historic economic recovery. "Today's levels are not irrational," the Oaktree Capital co-chairman told CNBC. "They're ultra-high because interest rates are the lowest they've ever been." SEC's Gensler wants to fully regulate crypto SEC Chairman Gary Gensler said Wall Street's top regulator needs Congress to grant it legal authority for overseeing a vast and ever-evolving cryptocurrency market. He said many of the crypto coins were trading like assets and should fall under the purview of the SEC, which already has significant authority over digital assets.
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