{"id":6625,"date":"2021-01-10T12:00:41","date_gmt":"2021-01-10T12:00:41","guid":{"rendered":"https:\/\/www.radiofree.org\/?p=148199"},"modified":"2021-01-10T12:00:41","modified_gmt":"2021-01-10T12:00:41","slug":"speculative-blank-check-companies-surround-tony-blinken-biden-administration","status":"publish","type":"post","link":"https:\/\/radiofree.asia\/2021\/01\/10\/speculative-blank-check-companies-surround-tony-blinken-biden-administration\/","title":{"rendered":"Speculative \u201cBlank Check\u201d Companies Surround Tony Blinken, Biden Administration"},"content":{"rendered":"
There is a<\/u> likely apocryphal company from the 1720 South Sea financial bubble, a long-forgotten stock market craze in England caused by the rapid appreciation and collapse in the stock of a proposed slave-trading company. Companies were created left and right, many with unclear purposes, including one venture<\/a>: \u201cFor carrying-on an undertaking of great advantage but no-one to know what it is.\u201d<\/p>\n That\u2019s a good summary of what special purpose acquisition companies, or \u201cblank check\u201d companies, are: Investors are expected to trust a management team to find good business ventures to finance. SPACs gain their existence from loopholes in securities laws that make it easier to launch companies on the stock market through a SPAC than a traditional initial public offering, with much more leeway to make claims about future performance.<\/p>\n SPACs have attracted recent attention because of Pine Island Acquisition Corp., a SPAC with close ties to the Biden administration that is seeking to merge with a defense company. Secretary of State nominee Antony Blinken is an \u201cadviser\u201d to the firm. Defense Secretary nominee Lloyd Austin is also affiliated with the firm, as is Mich\u00e8le Flournoy, who was also being considered for defense secretary. Director of National Intelligence designate Avril Haines is employed by Westexec Advisors, the Blinken-headed consulting firm that is closely associated with Pine Island. Pine Island went public six days before Blinken\u2019s nomination was announced.<\/p>\n<\/div>\n The SPAC market has grown rapidly, accounting for over 40 percent of the total initial public offering market in 2020. In 2019, there were just 59 SPAC IPOs, and they raised $13.6 billion in total. By 2020, there were 248 raising $83 billion in capital \u2014 a growth of over 600 percent in just one year. This rapid growth has resulted in problems. One of 2020\u2019s most vaunted SPACs launched the electric truck maker Nikola Corp. But it turns out that the company had used<\/a> a nonfunctional prototype in its promotional materials, and its stock cratered.<\/p>\n<\/div>\n A review of financial disclosure documents shows that Blinken also has<\/a> a business relationship with Chamath Palihapitiya, who has sponsored six SPACs with his company Social Capital over the past few years, making him one of the most active participants in the space. Blinken has an equity stake in the general partnership of Social Capital.<\/p>\n Jeff Hauser, the co-executive director of the Revolving Door Project at the Center for Economic and Policy Research, raised the possibility that Blinken could be paid more than the actual worth for his stake in the Social+Capital GP. \u201cThe illiquidity and opacity of the investment means that an overpay would be very difficult to prove by any third party,\u201d Hauser said, and that as a result, Blinken could be \u201csubject to additional capture by a wealthy and active investor.\u201d<\/p>\n<\/div>\n <\/span><\/p>\n In a request for comment from The Intercept, a spokesperson for President-elect Joe Biden\u2019s transition team said that Blinken \u201cprovided this California-based company with broad geopolitical advice on longer-term investments focused on solving hard problems like curing cancer and space exploration. He did not take part in the firm\u2019s day-to-day operations, fundraising, or investment decisions.\u201d The spokesperson additionally said that Blinken did not invest any of his money in the firm and that he will sell his full interest if confirmed.<\/p>\n Advocates say that Blinken\u2019s stakes \u2014 and SPACs more broadly \u2014 merit scrutiny.<\/p>\n \u201cSPACs essentially require investors to have blind faith in the acumen \u2014 and the connections \u2014 of the people who spawn them. They are deserving of more regulatory scrutiny, especially as they have generally proved to be losing propositions for investors,\u201d said David Segal, the executive director of Demand Progress, which has been advocating accountability in the Biden transition.<\/p>\n \u201cThe various associations between top players in Biden\u2019s orbit and SPACs raise concerns that they won\u2019t be subject to serious scrutiny. The Pine Island SPAC is especially concerning because, by its own admission, connections to revolving-door figures are a driving facet of its value proposition, and it raised hundreds of millions of dollars as many of its principals were considered top contenders for Biden administration posts.\u201d<\/p>\n Beyond the Nikola affair, other research shows that SPACs have been a bad deal for investors.<\/p>\n