The Update Issue: The SEC Circles SPACs and a Landmark Oscar Moment (Not the Slap!)

Yesterday, the Securities and Exchange Commission ('SEC') proposed new investor disclosure rules for special purpose acquisition companies ('SPACs')... If implemented, the new rules will force SPACs to tell investors more about their ownership structure and the performance forecasts for the companies they propose to acquire. The New York Times' DealBook notes that "In some cases, […] Not rendering correctly? View this e-mail as a web page [here](. [Empire Financial Daily] The Update Issue: The SEC Circles SPACs and a Landmark Oscar Moment (Not the Slap!) By Berna Barshay --------------------------------------------------------------- [Here’s what you missed last Thursday]( The recent sell-off has opened a "backdoor" that could crush gold and double your money on some surprising stocks. The man who's been called "the finest business journalist in America" by Jim Cramer explained how it works... And even gave away a FREE recommendation using the same strategy that could have doubled your money 14 different times so far. [Watch the replay by the end of today](. --------------------------------------------------------------- Yesterday, the Securities and Exchange Commission ('SEC') proposed new investor disclosure rules for special purpose acquisition companies ('SPACs')... If implemented, the new rules will force SPACs to tell investors more about their ownership structure and the performance forecasts for the companies they propose to acquire. The New York Times' DealBook notes that "In some cases, SPACs may have to register as investment companies, subjecting them to stricter rules." SPACs went through a boom and were pitched as a fast, easy way for small- and medium-sized private companies to access the public markets with less red tape. But the SEC comments reflect that this shortcut may also translate to less scrutiny and information for investors than what would be offered in a traditional initial public offering ("IPO"). Yesterday's press release makes it clear that the SEC doesn't approve of SPACs as a way for companies to go public without the same regulatory protections for prospective investors... "Nearly 90 years ago, Congress addressed certain policy issues around companies raising money from the public with respect to information asymmetries, misleading information, and conflicts of interest," said SEC Chair Gary Gensler. "For traditional IPOs, Congress gave the SEC certain tools, which I generally see as falling into three buckets: disclosure; standards for marketing practices; and gatekeeper and issuer obligations. "Today's proposal would help ensure that these tools are applied to SPACs. Ultimately, I think it's important to consider the economic drivers of SPACs. Functionally, the SPAC target IPO is being used as an alternative means to conduct an IPO. Thus, investors deserve the protections they receive from traditional IPOs, with respect to information asymmetries, fraud, and conflicts, and when it comes to disclosure, marketing practices, gatekeepers, and issuers." After experiencing a huge boom in interest – and new issues – in late 2020 and early 2021, SPACs have offered investors a notoriously bumpy ride... The Defiance Next Gen SPAC Derived Fund (SPAK) is down almost 50% from its February 2021 high... While there have been some great SPAC sponsors out there acquiring solid businesses – I even found one I love to recommend in my Empire Market Insider newsletter (you can find out how to gain instant access [right here]( – there are plenty that have been total disasters, including a few that I warned my readers about right here at Empire Financial Daily... Think companies like [23andMe (ME), which is down 75% since I first wrote about it in February 2021]( during the height of the mania. --------------------------------------------------------------- Recommended Link: ['God Code']( Programmable]( For the past 50 years, developers and programmers used the binary code to create every piece of software you use today. But now, highly specialized programmers are using a different code to make everything from vaccines to plant products to data-storage devices and more. McKinsey, a leading consultancy, claims this code will usher in a $4 trillion industry. And Wall Street is starting to take notice. The man CNBC nicknamed "The Prophet" says he's found the one little-known company that has the potential to rule this industry and become America's Next Big Monopoly. [Get the full details here](. --------------------------------------------------------------- Better late than never – but the SEC getting involved now feels a bit like closing the barn doors after the horses have already gotten out... Not only have SPACs already taken a bath in terms of price, but the big boom in SPAC money raising seems to be behind us. According to the Times, more than 600 SPACs raised $160 billion during 2021. But in the first quarter of 2022, only about 50 SPACs came to market, raising just $10 billion. That said, what's done is done... We can't unwind the damage already inflicted by less scrupulous or less experienced SPAC sponsors who shamelessly promoted certain deals to be something other than what they really were. At least we can fix this going forward and return credibility to this asset class, which has its place in the market, when vehicles are run by credible sponsors buying legitimate businesses. Among the proposals is a requirement for "additional disclosures about SPAC sponsors, conflicts of interest, and sources of dilution" – something that might greatly impede the ability of fly-by-night sponsors to throw together SPAC deals in which the sponsor wins but investors lose. Moving on, something really important happened at the Oscars... And no, I'm not talking about Will Smith slapping Chris Rock. This happened... Source: The Hollywood Reporter Deaf family drama CODA took home the Best Picture Oscar, as well as those for Best Supporting Actor and Best Adapted Screenplay. Which is notable from a business perspective mainly because the film was released by tech giant Apple (AAPL) on its relatively new streaming service, Apple TV+. CEO Tim Cook, who was at the Oscars, was pleased... Source: Twitter/@tim_cook Apple picked up the film, which cost $10 million to make, for around $25 million at last year's Sundance Film Festival... And the company spent about that much campaigning to win the big prize. With just $50 million, Apple leapfrogged its two biggest streaming competitors to win the most coveted prize in Hollywood, after just two and a half years in the business. Puck's Matthew Belloni rightfully sets the context here... Two and a half years. Netflix (NFLX) and Amazon (AMZN), after more than a decade of original content, and five years of aggressively throwing hundreds of millions of dollars at lavish campaigns, will have been outplayed by their richer tech rival. This isn't exactly inventing the Macintosh or iPhone, but for a consumer products company that has always positioned itself as creative rather than utilitarian, reaching the apex of Hollywood would be a triumph. Even Steve Jobs would be mildly impressed. I could devote an entire essay to how Apple pulled this off. But this reputational triumph – in combination with the mountain of accolades that have been poured on its original comedy Ted Lasso in its TV division – means that Apple is here to stay when it comes to streaming. Apple's streaming service has had its hits, but there isn't a ton of content on it, especially when you consider its parent is the highest market cap company in the world with $200 billion sitting in its bank account. With its Oscar, Apple isn't going anywhere... but if it wants to enter the top tier of services as measured by subscribers, Apple TV+ needs more content. My takeaway from the CODA win is that the probability of Apple making deals in the space has gone up. As for the slap, there has been so much written about it that there isn't much I can add... but I will say Will Smith's moment of terrible judgment is interesting from a business perspective. The actor had cultivated an incredibly well-manicured image over the years... Source: Twitter/@Hedge_FundGirl Will he become Kevin Hart or Kevin Spacey? The former was canceled for all of five minutes, whereas the latter seems to have permanently disappeared. I think a lot of this will be determined by how the press cycle is managed over the next few weeks. Like a consumer product, Smith had a well-crafted brand, and one that has taken a major hit. Looking at brand history... Coca-Cola (KO) came back from New Coke... Lululemon (LULU) came back from the see-through batch of yoga pants... And Johnson & Johnson's (JNJ) Tylenol came back from actually killing people when a batch was tainted. On the other hand, I don't think retailer Abercrombie & Fitch (ANF) has ever come back from years of promoting an outdated notion of beauty, and similar missteps were nearly fatal for Victoria's Secret (VSCO) before the company recently righted itself. But Americans love a comeback... I had more trouble thinking of brands that didn't come back from a PR controversy than ones that did. The ones that didn't come back felt concentrated in marketing to youth, who are notoriously fickle anyway. This probably bodes well for Smith, as does his historical bankability. Hollywood loves a moneymaker. In the mailbag, lots of letters about yesterday's piece on Disney (DIS)... Is the SEC doing the right thing here with SPACs... or is this regulatory overreach? If you have Apple's streaming service, do you think it offers enough content? What would you like to see the service add... more originals, movies from the other studios, news, sports? [Click here](mailto:feedback@empirefinancialresearch.com?subject=Feedback%20for%20Berna) to share your thoughts in an e-mail. Many readers pointed out the fact that I didn't include an extended discussion of what is actually in the Florida bill – one of those letters is below. To be clear, my essay wasn't meant to be a discussion of the bill – which is why I didn't get into the details of it or offer an opinion on it. The piece was about CEO Bob Chapek and the rocky road he has had since becoming CEO of Disney, which in addition to the Florida bill controversy includes his fallout with his predecessor Bob Iger, the very public dispute with Scarlett Johansson, irate Parks customers, and DIS share underperformance. I don't have the space in a 1,000 to 2,000 word essay to get into the specifics of the bill, nor does that really matter in discussing this controversy from a business perspective. "Dear Berna, This statement made does not fully describe the bill: The legislation, which was signed into law on Monday, prohibits 'classroom discussion about sexual orientation or gender identity.' While advocates say the bill puts the power of making sex education decisions back in the hands of parents, opponents argue that the law erases identities for same sex parents and LGBTQIA+ teachers and students. Leaving out these simple and clear extra details adds more complete context that is important: prohibits 'classroom discussion about sexual orientation or gender identity for grades Kindergarten to third grade.' "The fact that this was omitted demonstrates clear bias and does not work to well inform. Of course I have no objection to my tween and teenager learning about this in school, my kindergartener, well, might be a little too early for this. I think correcting this article and adding this context is the right thing to do so people can have a more information to correctly base their opinions and emotions." – Rosa C. Berna comment: Rosa, see my comment above. There has been a ton written about what is and what isn't in the bill in newspapers and online news sites. I am writing about it from the business perspective, and I don't have the space to get through the business implications and rehash all aspects of the bill... I expect readers to turn elsewhere to get their facts about all the details within the bill. I tried to stay impartial... but since your letter and others say that I was not, I will admit that yes, I think the bill is hurtful to children. My daughter is in fourth grade, so she is just out of that K-3 age group, and she has had several classmates in grade school and nursery school who had two fathers or two mothers. How do you get through nursery school or kindergarten without discussing your parents? She made family trees in both pre-K and K, at different schools. If she had two moms instead of a mom and a dad, how could she avoid discussing sexual orientation? Are there no children in Florida in grades K-3 that have two moms or two dads? The reason the Disney employees walked out was because of the feelings and health of those children, and yes, I empathize with that. But I chose not to share that until so many letters brought up that I didn't talk about the K-3 aspect of the bill... because here at Empire Financial Daily, my goal was to discuss this controversy from a business perspective in regard to Chapek and Disney. "Berna, RE: Disney/Bob Chapek discussion: 'Whether you love or hate the Florida legislation, one thing is clear here... Neutrality wasn't a viable option. I've written before that in these modern times, companies need to pick a side' "[My] comment: So, where is that written? "As a consumer, I personally HATE it when a business – of any size – seems to believe it needs to take a side on a particular issue. If you do, you're automatically insulting/attacking 1/2 of your customer base. Why would you do that??? I own a small business and I NEVER purposely get sucked into these types of societal issues. If a customer brings it up, fine, but I just listen. "Yesterday, and again today, I sent an email to Bob Chapek, asking him to quit the 'wokeness.' As a Disney shareholder, I really wish Disney (and Bob Chapek) would just shut up and stick to serving their millions of customers. Isn't that why Disney exists in the first place? According to the Disney website: 'The mission of The Walt Disney Company is to entertain, inform and inspire people around the globe through the power of unparalleled storytelling, reflecting the iconic brands, creative minds and innovative technologies that make ours the world's premier entertainment company.' Walt Disney himself would be aghast!" – Gene S. Berna comment: Consumers vote with their feet... And in our increasingly divided world, that's why companies often end up having to pick a side. Employees also vote with their feet. Disney simply can't deliver its services – streaming, in theaters, on TV, or in the Parks – without the contributions of LGBTQIA+ individuals. Maybe a bank or manufacturing company can... but a creatively oriented company can't. That's why opting out doesn't work for Disney. Execution of that mission relies on employees who are almost universally outraged by this bill, and contributions to the politicians that sponsored it. Regards, Berna Barshay March 31, 2022 If someone forwarded you this e-mail and you would like to be added to my e-mail list to receive e-mails like this every weekday, simply [sign up here](. © 2022 Empire Financial Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Empire Financial Research, 601 Lexington Ave., 20th Floor, New York, NY 10022 [www.empirefinancialresearch.com.]( You received this e-mail because you are subscribed to Empire Financial Daily. 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