What the...Chamath?!

Hi Everyone 👋  

Happy Mother’s Day! I’m going to keep this week’s letter short as I procrastinated in my writing (as usual) and need to get to mother’s day dinner soon. In my ideal scenario, I would have finished this letter yesterday, baked a lemon-blueberry loaf, called my grandmother in India, bought fresh cut flowers and brought them to my dearest mother this morning already. And after a fun brunch with lots of laughs and hugs, I would’ve been casually hitting the ‘send’ button right around now. But that would’ve been way too ideal. So like a more normal human being, I dilly-dallied all day yesterday, watched the SNL, opened a bottle of the incredible 2017 Philippe Chavy Mersault that my bestie Jojo got for me, and then woke up too late this morning, didn’t call grandma or bake the loaf and now I’m scrambling to finish this and make it to dinner on time. But hey, it’s the thought that counts, right?

Thankfully, we don’t have too much on this week’s SPAC agenda anyways. Except for wtf is going on with Chamath. When I wrote last week that I was nervous if future Chamath’s deals fail to perform, what I was implicitly assuming was that it would be a good deal, like an IPOE merging with SoFi kinda deal. (Which btw, they set a date for shareholder merger meeting for May 27th). Not IPOF merging with Equinox kinda deal. It’s still a “rumour” but apparently IPOF is in talks to merge with Equinox; at a potentially $7B valuation, or 22x 2023 projected EBITDA of $320M, and a projected PIPE of $2B. WTF?! The fancy gym operator reported $350M in losses on $650M in revenues last year and has ~$1.5B in debt. Silver Lake valued the company at $9B as part of their funding round last year, with the hope that Equinox, with its Soul Cycle franchise, would be able to go head to head with the rival Peloton. While the valuation is almost down by ~$2B since then, and yes there is some bid for a ‘recovery play’, the valuation is still too crazy. But that aside for a minute, is this even a deal that Chamath should be looking at?

I mean we are all aware of Chamath’s skinny legs, so from that perspective, buying a gym company makes some sense I guess. Hot boi summer! The folks at KEDM maintain a “Leg Day Index”, which is an equal weighted index of all Chamath 6-SPACs, and as you can see from the graph below, the leg-day returns have been skinny since Feb and could use some strength…

Also interestingly, this rumour was reported right after Bill & Melinda Gates announced their divorce, and then twitter educated me that the top 10 billionaires in the world have been divorced 13 times so far:

So that got me thinking that the only rationale why Chamath (a billionaire himself) would endorse a deal like this is because:  

Haha! And while my twitter audience appreciated that joke, my portfolio did not. Both the IPOF and IPOD took a beating and so did their warrants, ending the week pretty close to NAV. For some context, when IPOD and IPOF units started trading, they opened at ~7-10% premium on the very first day, before doubling to almost $20 in mid Feb, on absolutely no news and just euphoria. So for them to now trade this close to NAV is a real sign of the times. (But also a good buying opportunity if you believe that Chamath isn’t totally out to lunch.)

I really hope that this rumor just ends as a rumor. Chamath needs to find a better ‘10x in 10 years’ deal and something that is more aligned with his mandates like climate change, crypto, Defi etc. Also, he needs to get to work before he takes off to Italy for the summer. No dolce vita with his Amore while we retail bros lose money and can’t even buy a margarita for our bae.

And I shall get to work as well, and head over to dinner. Have a great week ahead folks!