Overlooked in the hype about SPACs is the truism they are an innovative financial structure that serves a very specific purpose: a superior source of capital for mid-sized companies over the traditional initial public offerings (IPO) process.
So says Doug Braunstein, founder and managing partner at Hudson Executive Capital, which has underwritten several successful SPAC offerings. The firm manages about $1.6 billion in investable assets. His years as a banker at First Boston, Merrill Lynch and finally at JPMorgan Chase gives him unique insight into the mergers and IPOs. He served as head of JPMorgan’s Americas Investment Banking and Global M&A.
He also served as the firm’s Chief Financial Officer, and a member of JPMorgan’s Executive Committee, working directly with Jamie Dimon.
Braunstein observes there are “very significant competitive advantages” for the SPAC structure versus an IPO: It’s a faster, more certain process in terms of pricing, and has a greater degree of flexibility. The disclosures are better as well, including revenue and profit projections, allowing companies to provide investors with more information, “allowing them to tell a much more complete story.”
Hudson Executive Capital has a substantial stake in Deutsche Bank (DB) since 2018; the bank has spent much of the past few decades suffering from scandals, trading losses, and other self-inflicted wounds. DB has new management, and is in the early stages of a turnaround. It is one of the few banks considered a “national champion,” with the potential to grow tremendously from its current $24 billion market cap.
He also discusses why JPM Chase’s “fortress balance sheet” allowed the firm to take advantage of numerous opportunities during the financial crisis of 2008-09. They acquired Bear Stearns and Washington Mutual cheaply — was each having a temporary liquidity crisis; they also passed on Lehman Brothers which was having a more serious solvency issue; they also helped with the workout of AIG. Braunstein called being CFO of JPM Chase a “remarkable privilege” and an “awesome responsibility.”
A list of his favorite books are here; A transcript of our conversation is available here.
You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.
Be sure to check out our Masters in Business next week with Jean Hynes, incoming CEO of Wellington Management. The firm has over $1 trillion client assets under management. Hynes also runs the $51B Vanguard Healthcare Fund – the country’s largest health care fund.
