SPACs: Avoiding Volatility, Evading Regulation

(Source) The American economy shattered records in 2020. In April, the unemployment rate rose to 14.7%, the highest rate in the history of the data. By June, national debt had increased by twenty-five percentage points since the end of 2019, the strongest surge in history. In July, the Bureau of Economic Analysis found that U.S. gross domestic product fell 31.4% during the second quarter, representing the biggest recorded contraction of that figure. Two-thousand twenty was a record-breaking year for Wall Street, too. On March 16, the Dow lost 2,997.10 points, a larger one-day percentage slide than the one on Black Monday in 1929. However, by August, the Dow had erased all of its 2020 losses and the S&P 500 closed at an all-time high after its severe plummet earlier in the year.  There was another source of record-breaking activity on Wall Street last year. Special-purpose acquisition companies, or “SPACs,” have entered the market in unprecedented numbers. In 2020, SPACs conducted 248 initial public offerings (“IPOs”) and raised over $83 million. By contrast, 2019 –  also an unprecedented year for SPACs – saw only fifty-nine SPAC IPOs and $13.6 million raised. SPACs are public companies formed for the purpose of merging [read more]

Chasin’ Carry: Assessing the IRS’ § 1061 Proposed Regulations

(Source)   The world of private equity is fascinating. Larger-than-life firms pool immense amounts of capital from individual and institutional investors. Firms organize these pools into funds, secure leverage, and begin investing in, restructuring, and ultimately selling for profit, a variety of assets, like distressed businesses and real estate. In theory, numerous parties stand to share in the spoils. Should they successfully argue their case before the fund, asset owners can raise capital without navigating the burdensome processes of debt financing or issuing public shares. Moreover, the owners and their assets also benefit from the knowledge and management expertise accompanying the private capital. Of course, the fund’s investors stand to gain substantial returns on their investments. And the spoils are plenty: according to Bain and Company’s 2020 Global Private Equity Report, in 2019 total buyout value was $551 billion and total exit value amounted to $405 billion. What do the fund managers gain from all of this? In return for their services, fund managers are assigned interests in the investments’ ultimate profits. These interests are termed “carried interests,” or, more colloquially, “carry.” (The term stems from the practices of medieval merchants in Europe who were issued interests in the profits [read more]

Legalize and Regulate: The Solution to the Unsolvable Drug Problem

(Source)   Legalizing recreational drug use, which is not morally wrong since its use does not directly harm anyone but the user, will benefit society as a whole by allowing for safer participation, less incarceration, and increased economic contributions through taxes. Since the passage of the 21st Amendment in 1933, which ended the nation’s prohibition on alcohol, the consumption of alcohol has been embraced by society overall. The government legalized alcohol and society widely accepted and consumed it, despite its proven immediate and long-term dangers. Thus, given its approach to alcohol use, the government should permit its constituents to decide what substances they put in their bodies.  Realistically, people will use drugs if they want to use drugs. I am not advocating for an entirely hands-off approach; rather, I argue that broadly legalizing drugs will allow lawmakers to hone in on the aspects of drug use that have raised concern for decades. Part 1: Legalization and Regulation Legal access to drugs does not necessarily equate to increased use and instead creates an opportunity for better oversight. Thus, legalizing all drugs will allow the government to regulate these substances more effectively by crafting targeted legislation, made in conjunction with scientific research, to [read more]