February 12, 2008
An undertaking of great advantage
Andrew Ross Sorkin’s column in the New York Times this morning on Special Purpose Acquisition Companies opens on the intriguing fact that Michael Gross must find a company to buy in the next 14 days for $300m or return the cash to his shareholders.
The rise of Spacs - shell companies that raise money in an initial public offering to buy unidentified other companies - reminds me of the days of the South Sea Bubble. Investors in Spacs are pretty much going on faith that the sponsors of these vehicles know what they are doing.
Old hands will recall the story in Charles Mackay’s Extraordinary Delusions and the Madness of Crowds about the South-Sea era company that was formed:
For carrying on an undertaking of great advantage; but nobody to know what it is.
