Recently famous investors Warren Buffett and his business partner Charlie Munger held the annual Berkshire Hathaway shareholders meeting. During this meeting that lasted about 4 hours Warren Buffett answered all the hard hitting questions including there opinions on SPAC stocks and day traders.
“It’s a killer,” Buffett said about special purpose acquisition companies on Berkshire’s ability to find businesses to buy. “That won’t go on forever, but it’s where the money is now and Wall Street goes where the money is.”
The now 90 year old Buffett acknowledged the pressure from SPACs just as Berkshire reported Saturday that it had a record piles of cash at the end of March with $145.4 billion in funds. He also spent part of Berkshire’s annual meeting Saturday addressing the recent boom in retail and day trading likely thanks to Robinhood. A lot of people have entered the stock market “casino” over the past year, he said.
“The gambling impulse is very strong in people worldwide and occasionally it gets an enormous shove and conditions lead to this place where more people are entering the casino than are leaving everyday,” Buffett said. “And it creates its own reality for a while and nobody tells you when the clock’s going to strike 12 and it all turns to pumpkins and mice.”
Our Opinion On The SPAC STOCK MARKET
SPAC stocks by nature serve a much different purpose to the market then one might think, they allow companies quick access to public markets like Golden nugget casino that needed the funds during the crisis well also giving un accredited investors a chance at a pre IPO.
However as we have stated the risks many times, these companies come to the public markets fully priced in as they are purchased similar to how a car is purchased on auction. This will always imply that the SPAC acquiring the company is likely paying the top bid.
Though we believe as well thanks to speculation, value in the markets are depleted but there still are foundational companies that will come to the public market via a SPAC and finding them can still be a gold mine! For example UTZ has been crushing the markets being in consumer packaged goods this is a company Warren Buffett was even quoted saying they wish they could of acquired it!
Warren Buffett and Charlie Munger agree the markets continue to be heated in a way that they have never seen before and its taking away professional investors abilities to purchase companies at discounts.
Charlie Munger chimed in on the subject calling it “shameful” on the part of professionals who took advantage of those gambling, with Buffett clarifying that it’s not shameful for the individuals who want to gamble, since it’s a “very human instinct.”
“It’s shameful what’s going on,” Munger said. “It’s not just stupid. It’s shameful.”
SPAC stocks to some degree have caused a frenzy into the IPO market and it has given liquidity to businesses that would other wise be bankrupt, as its quite clear managers were taking advantage on some ends and investors were risking to much on others.
Thanks to this hype bursting the SPAC market we believe now is the time to take advantage because we still strongly believe the company is more important then the merger and if I can get a discount on a SPAC like IPOE I may not complain!