SPACs Hit the Wall Hard in July

SPAC market hits a wall as issuance dries up and valuation bubble bursts

The SPAC boom is officially a thing of the past.

Not a single special purpose acquisition company was issued in July as the market slowdown turned into a screeching halt, according to CNBC calculations of SPAC Research data. Sponsors who once took advantage of a hot market were forced to pause as investor interest waned and regulatory pressure ramped up.

SEC Charges Surgical Implant Manufacturer Surgalign and Former Senior Executives with Accounting and Disclosure Fraud

The Securities and Exchange Commission today charged Surgalign Holdings, Inc., formerly RTI Surgical Holdings, Inc., and former executives Brian Hutchison and Robert Jordheim for masking disappointing sales numbers by shipping future orders ahead of schedule to accelerate, or “pull forward,” revenue and then failing to disclose this practice to investors. In June 2020, RTI restated its public financial statements from 2014 through 2019 to correct errors caused by this practice.

As alleged by the SEC, RTI’s reliance on pull-forwards cannibalized future revenue streams and damaged important customer relationships while the company reassured investors it was meeting revenue guidance. The SEC further alleged that RTI sometimes shipped orders early without customer approval and recognized revenue for those shipments prematurely, in violation of generally accepted accounting principles (GAAP), and that RTI’s former CEO, Hutchison, and former CFO, Jordheim, permitted RTI to recognize revenue for such shipments.

After the crypto crash comes the SEC crackdown

But as investors’ losses mount and enforcers’ expanded crypto arms get to work, it looks like a day of reckoning is finally coming for some of these companies, which have been operating in a space with few rules. The outright scams, obviously, weren’t following the rules at all. But some of the more legitimate companies, allegedly, have played fast and loose with them too.

“The arrogance and the hubris in the realm of crypto is so beyond measure,” Stark said. “They’re always belligerent, combative, and calling the SEC sketchy.”

Coinbase Asks Supreme Court to Halt Account-Holder Suits

Coinbase Global Inc. asked the US Supreme Court to halt two lawsuits by users of the cryptocurrency exchange platform while the company presses appeals that seek to send the cases to arbitration.

In one case, a man says Coinbase should compensate him for $31,000 he lost after he gave remote access to his account to a scammer. In the other, Coinbase is accused of violating California consumer law by holding a $1.2 million Dogecoin sweepstakes without adequately disclosing that entrants didn’t have to buy or sell the cryptocurrency. Both suits seek class action status.

Virginia pension fund invests in crypto lending in bid to boost returns

A $6.8bn Virginia pension fund is looking to boost its returns by investing in crypto lending markets despite a crisis in the sector that has pushed several companies into bankruptcy and left retail investors with heavy losses.

The Fairfax County Retirement Systems recently gained approval from its board of trustees to begin investing in “yield farming” in which investors lend out their digital tokens to crypto projects in return for a fixed stream of payments.

“Some of the yields that you’re able to achieve in a yield farming strategy are really attractive because some of the people have stepped back from that space,” Katherine Molnar, chief investment officer of the Fairfax County Police Officers Retirement System, said in an interview.

Michael Saylor Bet Billions on Bitcoin and Lost

If you ask Michael Saylor why he bet the future of his company on bitcoin, he’ll tell you he didn’t have a choice.

In 2020, MicroStrategy Inc.’s stock was stagnant, and the tech company struggled to compete with software giants. “We were either going to die a fast death, or a slow death, or embark on a risky strategy,” he said.

He opted to buy bitcoin—lots of it. That decision backfired, badly. On Tuesday, MicroStrategy announced Mr. Saylor would step down as CEO, a position he has held since 1989, amid mounting losses tied to bitcoin.

No Investor Should Be Buying Single-Stock ETFs

Issuers of exchange-traded funds plan to roll out a wave of single-stock ETFs. These funds, a handful of which are already available, will bet against individual stocks or amplify their daily moves or both. Needless to say, single-stock ETFs have not been greeted with enthusiasm. Regulators are sounding alarms about their risks. Financial advisers are warning investors to stay away. CNN called them apocalyptic.

My colleague and ETF guru Eric Balchunas thinks the reaction is “overly-hyperbolic pearl clutching,” and he’s not wrong, mostly because ETFs jumped the shark long ago….