The Roaring 20s
for blank check companies 🥂
Good Monday Morning! It’s Feb 22nd, which means it’s “Single Tasking Day” — a holiday that encourages us to do just one thing at a time. Can’t wait to celebrate by simply saying “no, not right now” all day.
Anyway, here’s our SWIRL:
📱Tech: Bitcoin’s value exceeds Mexico’s GDP
📈Business: It’s the roaring 20s for ‘blank check’ companies
🏛Politics: Maryland gets a new suit with its new tax
If this is your first SWIRL, keep reading this part. If you’ve been here before, carry on to the content. Welcome, new Swirlers! Here’s a brief reader guide for you: the three teasers above will unfurl below to briefly cover a buzzy development in their respective areas. You’ll read a little about each one. At the end of SWIRL, we pull on a common thread among all three and explore what it might mean for us. If you missed last week’s SWIRL, tuck in here.
📱Tech: Bitcoin’s value exceeds Mexico’s GDP
As of Saturday at 11:48AM1 the market value of Bitcoin was worth more than Mexico’s 2020 GDP.
Let’s start with a quick refresh on ‘cryptocurrencies’ or ‘crypto.’ In short, cryptos are digital dollars 💵. They provide users with a medium for the exchange of goods and services, just like fiat or physical monies. Unlike paper currency, cryptocurrencies are stored in a way that makes fraud virtually impossible. They’re easy to buy and trade, they’re not regulated by banks & governments (yet), and many people think they’re just kinda cool 😎. Bitcoin is one of many cryptos out in the wild today.
None of this necessarily explains why Bitcoin recently passed the $1T USD milestone.
That’s not a short story, but a recently updated deep-dive by Investopedia does a great job detailing Bitcoin’s rise 📈 over the last decade. Here’s the gist of it:
💼 Bitcoin, and crypto at large, has moved out of the ‘basement’ and into the ‘board room’ as big business begins to warm to the idea
💲Some companies are officially getting in: Tesla, BNY Mellon (oldest bank in the US), Square, and MicroStrategy have incorporated Bitcoin into their corporate treasuries
🔐 Significant economic instability in countries like Venezuela has increased Bitcoin activity as users find value in storing wealth in globally distributed ‘vaults’2 like those used by Bitcoin
The price of one Bitcoin on Saturday morning was $52,627 USD. While its passing the $50K USD mark was a BFD3, people have wondered if the digital currency could hit the $100K USD mark. Fun fact: by design, there will only ever be 21 million Bitcoins in digital circulation. They’re not all yet available for trading. Approximately 18.6 million were in circulation Saturday morning. Once they’re all eventually mined, and if they reach $100K USD a piece, Bitcoin will have moved on from Mexico 🇲🇽 and overtaken Italy’s 🇮🇹 2020 GDP.
📈Business: Roaring 20s for “blank check” companies
Thirteen special purpose acquisition companies (SPACs) — often called ‘blank check’ ✍🏼 companies — filed paperwork on Friday to be listed on public stock exchanges. They joined a growing class of companies who file as publicly traded entities, but have no core business.
That sounds wild, right? If you’re already smart on SPACs, skip this paragraph. Traditionally, companies decide to ‘go public’ by listing themselves on a stock exchange and selling shares to investors — it’s called an initial public offering (IPO). Recent examples are the glitzy ✨ debuts of AirBnB and Door Dash. But IPO’ing isn’t always glamorous or easy. Enter: SPACs. These ‘shell’ or ‘blank check’ companies do all the expensive and time-intensive work of IPO’ing. After they’re public, they merge 🤝 with a private company in the market place. The private company gets to go public and raise investor dollars without an IPO. The SPAC finally gets an actual business. Win-win.
So, why was Friday noteworthy? Several big names in business launched their own SPACs, like Michael Dell, CEO of Dell Technologies, and Eduardo Saverin, Facebook co-founder. Both filed SPACs on Friday and they’re not alone. This relatively new4 approach to ‘going public’ has seen a sharp uptick in the last year.
2019: 59 SPACs raised ~ $13.6B USD
2020: 237 SPACs raised ~ $79.8B USD (almost 6x 2019’s total)
20215: 146 SPACs filed, targeting nearly $40B USD (half of 2020’s total in under two months)
This very moment: someone is likely planning another SPAC (petition for #OprahSPAC)
For most individual investors, this is largely mixed news. The upshot 👍🏼 is that SPACs are eagerly awaiting your investment dollars. You would buy stock in a SPAC because you think their management team is talented and you believe they will select a strong company for a merger, which could boost your investment in the long-run. The downside 👎🏼 is that many strong companies that would have directly listed in an IPO will choose to merge with a SPAC, complicating your ability to ‘get in on the ground’ (read: cheaper stock) in the newly traded company. Further, until the partnerships are announced, you likely won’t know which SPACs & private companies are courting each other. 💞
What do we know? It’s likely going to be a record year for SPACs. Again.
🏛Politics: Maryland gets a new suit with its new tax
If you thought we were going to make it through a SWIRL without mentioning Big Tech, well, you should know better — which is exactly what Big Tech told the state of Maryland 🦀 late last week.
Two weeks ago, Maryland became the first state in the US to join some European nations in levying a tax against digital advertisers. Under the new law, Maryland would collect about $250M USD in annual revenue 💰 from Big Tech companies like Facebook, Google, and Amazon, who must now pay taxes on digital ads appearing in the Old Line State.
Proponents of the law argue that advertisers should have to pay for data it collects on Marylanders in order to run digital ads. The bill’s author 📝 added:
“Companies like Amazon, Facebook, and Google have seen their profits drastically increase during the COVID-19 pandemic while our Main Street businesses are struggling to keep up.” - Maryland State Senator Bill Ferguson
Opponents of the law claim it’s illegal 🛑 because the ads are generated out of state, thus out of Maryland’s tax jurisdiction. They also argue that the taxes specifically target digital ads, and not physical ads, making them discriminatory and in violation of a federal law that requires digital taxes be equally applied to the physical versions of goods and services. The Internet Association, a Big Tech lobbying arm, said in response to the passing of the law:
“Maryland now has the dubious honor of being the only state in the country to have ever passed such a flawed tax, and the added distinction of doing so in the middle of a pandemic and economic crisis.” - Internet Assoc. Press Release
The ad tax opponents converted their response into an official complaint on Thursday when they filed a lawsuit 👩🏻⚖️ against Maryland. The lobbyists sued the state in a move that will likely be the first of several lawsuits of its kind around the country. Maryland isn’t the only state with digital ad taxes on their radar. Connecticut and Indiana have similar proposals in the works, as do Montana, Oregon, New York, and Nebraska.
The SWIRL
So, how do these three stories swirl together? Bitcoin, SPACs, and certainly taxes, aren’t “new.” However, this week, we saw how each phenomenon has entered into something of a new era. While each story represents new twists on creating value, these phenomena have also been catalyzed by the year-long pandemic.
Instability in traditional markets created by the pandemic are contributing to the burgeoning interest and investment in Bitcoin
SPACs are booming for a number of reasons, but it’s hard not to see a Covid connection: SPACs offer companies real time and money savings by avoiding the lengthy and expensive IPO process. As companies strategize for survival and post-pandemic plans, the extra time and money are all the more precious
The pandemic has ushered in record profits for Big Tech firms, who are benefiting from the socially-distanced economy. Most small businesses, municipalities, and states aren’t sharing in that good fortune. Digital ad taxes aimed at those profits are likely the initial skirmishes of a broader battle between government and Big Tech
New approaches on creating value, whether through digital currencies, digital ad taxes, or an explosive SPAC season, will be a defining feature of the pandemic. We will look back in several years to understand how individuals and organizations adapted to survive and/or thrive during this historic period. We won’t know if Bitcoin, SPAC-mania, or digital ad taxes will ultimately be success stories or not. But, we can be sure they’ll be a part of the story.
Subscribe and share SWIRL!
If you love reading SWIRL, but you’re not subscribed yet, the newsletter hits inboxes every Monday morning and the little button below makes that happen for you.
You can help us grow by sharing this week’s SWIRL:
Have an idea or tip for SWIRL?
Or just some feedback, a correction, or a question? Hit me up.
Special thanks 🙏🏼 to this week’s proof-reading team: Mary, Katie, and my mom!
SWIRL is written by Matt Suber and is published every Monday morning at 7AM ET.
The SWIRL brand, logo, and concept are copyrighted and trademarked.
Copyright © 2021 SWIRL. All Rights Reserved.
Saturday, Feb 20th at 11:48AM ET was the point in time at which I last checked the market value of Bitcoin at coinmarketcap. It was also when I checked the International Monetary Fund’s GDP charts to compare Bitcoin and GDP. Honestly, it’s a silly comparison, but it does provide interesting context - and makes for decent clickbait apparently. You’re here. Finally, this was also the time during which I made a whiskey drink because it was close enough to not being morning anymore.
Vaults = Blockchain. It’s the technology which underpins Bitcoin and most cryptocurrencies. If you - like me a few years ago - have no clue what Blockchain is, I’d point you to this very well-done Blockchain tutorial from Reuters. You’re either about to go down a three-hour-long rabbit hole (Yay, you!) or just shake your head and mutter something along the lines of “some people have too much time on their hands.” Just remember some of those people now have millions of dollars in their hands (Yay, them!). For the record, I am not one of them.
BFD = Big Financial Deal. Calm down, this is a professional email, ladies and gentlemen.
SPACs have been a ‘thing’ since the mid-90s, but they’ve traditionally clocked in around the $10B mark in terms of proceeds raised. 2020’s nearly $80B is off the charts.
As of February 19th, 2021