A Framework for Evaluating SPAC Investments | Louis Camhi of RLH Capital

Joshua Wilson: Louis, we've had you on some of our other shows in our network, and, uh, wanted to bring you back in to talk about SPACs, talk about what you do, and talk about how the relationship goes between investor and the deals you're working in. So Louis, welcome the show, man. 

Louis Camhi: Thanks. Appreciate, uh, being back with you guys.

Joshua Wilson: Yeah, man. All right. So let's start with this, Lewis. Why don't you tell the audience who might not have heard your other episodes, who you are and what you do. 

Louis Camhi: Sure. My name's Louis Ami. I run a, my fund called RLH capital RLH was launched back at the end of 2021, so a little over four years now. And we invest in SPACs throughout, uh, their entire lifecycle from risk capital, albeit we're not that active there to IPOs to secondary trading.

We'll also look to provide bridge financing to SPAC targets, um, and we'll provide structured solutions to facilitate the closing of a SPAC transaction. 

Joshua Wilson: So within, you know, quick overview of what is a spac and then we'll talk about those different places where you could deploy investment capital into the the spac.

Louis Camhi: Sure. So a SPAC is a special purpose acquisition company, also known as a blank check vehicle. Um, I think it's a fantastic instrument. Um, you should not listen to what they say on CNBC, but effectively what a SPAC is, it's a pool of capital that's raised at an IPO that goes out and seeks a merger transaction, which synthetically represents an IPO.

So you're taking a private business and taking it public, and in that process there's different ways to invest and different risk profile. Um, so for starters, when that capital is raised, it gets invested into money market funds that earns a return, which you as the investor receive. Um, you are entitled, if you play the IPO, usually you get right or warrant, so there's upside kickers there.

And then at the time of the transaction vote, you have the option of getting your money back with that interest or rolling into the equity in the common transaction. And so if you redeem, which is what we usually do, you're basically treating a SPAC like a. Effectively a treasury with convertible bond upside.

So a risk-free convertible bond if you opt to convert into the equity of the deal, and now you're taking on common equity exposure, which could be great or it could be terrible. Really depends on a deal by deal basis.

Joshua Wilson: So compare and contrast SPAC versus the PE model. 

Louis Camhi: So it's very similar. Some people will tell you that a SPAC is a single investment private equity fund.

So, um, the difference is a, a private equity model. There's usually no liquidity for a number of years. So a private equity firm will make their investment, they'll hold it for five years, and then they'll look to sell it or hold an IPO. With a spac, you could actually be on the backend of that private equity investment where you as a sponsor are looking for a good opportunity and you're bringing it public.

And in the process, you as a sponsor are getting economics, but you are now in theory helping this company go public, raise capital, do accretive things. Depending on the sponsor, you may be adding expertise at the board level. You may be facilitating a capital raise. Poor outcomes are when you do neither, you don't add expertise, you don't add capital and you know, you, you have a dilutive structure.

Um, and those are some of the deals that we try to, you know, avoid. Um, not that we take risks. 'cause as mentioned, we usually redeem, but we want that upside optionality, that's what makes things exciting. And so we'll look at deals and, and do the analysis to see if we have a view that there is upside optionality, or if it's really gonna trade, like the underlying fixed income instrument.

Joshua Wilson: Yeah. So RLH capital, what's that stand for? 

Louis Camhi: Those were my three kids, Robbie, Layla, and Hazel. 

Joshua Wilson: Got it. 

Louis Camhi: Um, we spent a lot more time than I should have trying to come up with a name. You'll never make everyone happy. All the typical finance names were taken, and so this was just, uh, this was easy. 

Joshua Wilson: Yeah. 

Louis Camhi: Has anybody asked 

Joshua Wilson: you that before?

Louis Camhi: Yeah. It's, it's actually in my marketing materials. We have it on one of the first bullets, or first page is the last bullet is, uh, what RLH stands for. 

Joshua Wilson: Yeah. What happens if you have another kid? Will that be acquisition company number two, RLH, whatever. 

Louis Camhi: I love having three kids, and I couldn't imagine having another one.

So 

Joshua Wilson: yeah, 

Louis Camhi: RRLH is my fourth kid, so 

Joshua Wilson: there you go. There you go. All right, so let's talk about investors and syndication within it, right? So you go out and, you know, in those different stages. Where do you, where do you like to invest, you know, first, like what, what's your, what's your sweet spot? 

Louis Camhi: So let's go chronologically.

We don't do a lot in risk capital. Um, and, and we can get into the reasons why. Um, we love IPOs, particularly of sponsor teams that we know that we have a high degree of conviction with. We underwrite every IPO we look at based on the terms. So, you know, how much cash and trust, is it $10? Is it more, um, do you have the ability to withdraw working capital?

How many warrants are you offering? How many rights are you offering? What is your track record like? Trying to come up with our own, you know, implied probability of a successful outcome. Um, then after that, we'll look at trading and most of the secondary trading is a yield game. You know, our financing cost is x.

Um, we find an opportunity that's yielding x plus 200 basis points or 300 on annualized return. Like that's great to us. We're buying treasuries at a discount, levering them up, and that is a, you know, core part of our investment strategy. Mm-hmm. Then we'll look at deals that have already announced and we'll say.

Okay, this is a really interesting deal. It hasn't gotten out there yet. Let's just say that it's trading at, you know, $10 and 10 cents with $10 and 10 cents in trust. I really have no downside here. And if I think the story goes out and it can trade up to 11, well that's 9% upside with no downside. That's tremendous.

And so we'll look at those. Then as part of our process, you know, I have this view that any good SPAC deal is good for business, whether I'm directly involved or not. And so I will try to talk to all the sponsors, all the companies, and through those conversations, we'll source opportunities for bridge financings, um, and other structures to help close the deal and retain trust.

And so, you know, we'll, we'll try to deploy capital. If not, we're happy to be an advisor. And like I said, if it's a successful deal and people realize that, oh good companies come through specs too. That's a win. Um, and then similarly after SPAC deals close, we usually keep in touch and see, you know, how can we be helpful?

Is there a mutually benefit, beneficial opportunity where we can help you with a, a capital raise or with an introduction or, or, or whatnot. 

Joshua Wilson: Yeah. So with this deployment of capital, let, let, let's approach this from. Good deal, bad deal. Right? You, before you strike a check, you guys aren't writing checks, right?

You know, like we're, 

Louis Camhi: we're clicking buttons. 

Joshua Wilson: Clicking buttons, okay. Before you click a button to write a check, you know, to a, to a group, what's a good deal? Bad deal. How do you approach that? 

Louis Camhi: Well, well, let's take a step back. Okay? If you're a SPAC and you haven't announced any deal, but you're trading at an attractive yield.

That's a good deal to me. 'cause I'm getting a effectively a near risk free return. Um, after that, if I'm looking at a deal, let's set price aside, which is a dangerous thing to do, but let's just focus on the, the qualitative here. What you really wanna see right now is a deal that's in an attractive industry to the SPAC market.

So that means quantum ai, nuclear, um, you know, anything where people are getting excited about and you wanna see it with a pipe. You know, we recently saw. One of the first transactions with a, a big, long only t Rowe price backed pipe. I just think that's great affirmation to the market and adds great credibility to a structure.

And when you see, okay, if t Rowe Price is willing to put money in at 10 bucks and the stock's trading at 10 10 and I have a put option on that trust account, that's really interesting. Um, and so, but, so those are the big things you wanna see. You know, the institutional backing of that transaction.

Because if you are, you know, a retail investor or you're not a sector specialist, you don't know if the target's good, if the valuation is good. But if you see, you know, someone kind of give it that stamp of approval, you know, okay, I gotta do the work. Now they're, they're here for a reason. They must know something, 

Joshua Wilson: right?

So you start seeing the pipes, you start seeing the institutions come in, and you, you have greater confidence that this might be a institutional grade investment. 

Louis Camhi: Exactly.

Joshua Wilson: Okay, 

Louis Camhi: so, so let's just, just to be clear, institutions get it wrong all the time. 

Joshua Wilson: All the time. 

Louis Camhi: So it, it's certainly not a cure all. But like, and I'll give you an example.

As we saw the DAT transaction coming in a big way, you know, we saw both in the SPAC wrapper and non SPACs, a lot of big dat pipes. And unfortunately the market sentiment changed and those underperformed. And so if you followed the institutions in, you know, you wouldn't have done as well. But at the same time, you at least knew to look.

And so. A, a big part to me is, you know, what does someone know that I may not know if, if I'm looking at an AI asset and someone's willing to put up real money? That's interesting. And again, for me, everything comes back to the downside protection of the SPAC structure. If someone's coming in for a $10 pipe, they're in theory taking on risk down to zero.

But if I get to invest afterwards, even if it's at a slight premium, I'm taking risk to the trust amount. And so that's a very interesting risk reward. 

Joshua Wilson: Yeah. So with PE model, it's the GP LP model, right? You have the general partners, they raise the money from the LPs, and then the gps do the the work, and then they sell the business and the money goes back to LP and they rinse, repeat, right?

That's the, yep. So with the spac, would it be like, uh, lp, gp, GP model? 

Louis Camhi: No, it's so, it's more, you know, the LP in your example would be the guys that buy into the SPAC IPO, right? Right. SPAC raises $200 million. Guys like me buy in. The SPAC sponsors who would be the gps are the ones that are going out there trying to source the target, trying to add value to the target, and they're getting economics for doing that.

Now, where the SPAC market has improved dramatically in the last four or five years is. The targets are not sophisticated enough to evaluate how much economics the sponsor is getting. And so if you are providing capital and expertise, you may get your full economics. If you are providing nothing, you may have to forfeit 90% of your economics.

And I think that's a really good thing because the worst transactions, looking back to, you know, the 2021 bubble, were the ones where you didn't raise any capital. Because of the sponsor shares, you diluted the target 20%. So that was actually a, you know, a value destructive go public transaction. And so it's good, you know, the, some of the easy money is gone for the sponsors and I'm sorry for them, but you know, it's healthier for the market that, you know, if you create value, you'll receive some of that consideration.

And if you don't, the sponsors know better. And we've been involved in a couple of transactions where the sponsors. Threatened to terminate because the minimum cash closing condition wasn't met. And so, you know, while those could be stressful if you're on the sponsor side, if you think about the staff market as a whole, I think that's a pretty healthy dynamic, 

Joshua Wilson: right?

So the, there's a sun setting window, right? When from the day you announce to the day you have to pull the trigger on a company. For those listening in, give us the, the, the range of what that is typically. 

Louis Camhi: Sure. So the range is pretty wide. It could be anywhere from 12 months to 24 months, plus a free six month extension.

So 30 months. 

Joshua Wilson: Yeah. 

Louis Camhi: And so what happens is during the IPO process, in your charter, it's stated your duration. And so at the end of your duration you can extend. And we actually really like when companies extend because you have to do one of two things. So let's pretend you know you had 24 months, which is the standard.

Now you get to the end of that, you have to hold a shareholder vote. The investors are gonna want some sort of consideration. And so the consideration can come in two forms. One of them is cash. So for example, investors will say, okay, you want to extend for another nine months? No problem. Put in 2 cents per month into the trust account.

And so if you're an investor. Now you're earning the underlying interest rate plus 2 cents per month, plus retaining this upside optionality. That's great. The other thing that they could do is they could say, you know what? For every a hundred thousand shares, we don't redeem and agree to let you extend.

We want 25% coverage in your sponsor shares. So now all of a sudden I have this embedded upside optionality to a transaction where if a transaction doesn't get done, um, then they're worthless. But if a deal does get done now I have free upside in the deal. And so we participated in, in a similar transaction, uh, maybe it was two years ago, where we didn't redeem, we received free shares in the deal.

Uh, the deal traded very well, and we were able to sell our shares for 11 or 12 bucks a share. And so to be, to be clear, that was our best outcome. Normally, we're selling them at two to five, but even still at two to five, you know, you're getting this free upside optionality. And you're taking an instrument, which is a spac, which as I mentioned is, you know, kind of like a, a convertible bond with treasury risk, and now you're adding another level of optionality onto that.

So from a portfolio standpoint, I think it's really interesting. I, I look at everything through the lens of don't lose money, and then okay, if. Once I have that covered, how do I try to make some money and have a respectable return? And so that's one way to do it where you've got, you know, you have the interest component on the underlying, you know, you have this built in optionality, but that optionality is only if it trades above 10.

And then if you do one of these non redemption agreements, you have optionality as long as the deal gets done. Yeah. And so I biased a little bit obviously, but I think it's, uh, it's pretty powerful on a portfolio level.

Joshua Wilson: Lewis first rule in investing. Don't lose money. Right? 

Louis Camhi: Right. 

Joshua Wilson: And 

Louis Camhi: second rule, don't forget rule number one.

Joshua Wilson: Right? Go back to rule number one, um, from an investor. Now this shows a lot of, you know, we, we have a lot of conversations about investor relations, right? It's the conversation, the relationship between the guy asking guy or gal asking for money and the one giving money, right? So that's what we believe good investor relations is.

It's really that relationship from the investor standpoint. What do you look for in the team before you say yes to them to deploy your own capital to them? 

Louis Camhi: So this is where SPACs are so different from, I used to be a long short guy. Okay. It's just so different in that you know, your downside to begin with.

And so the bar for me to deploy capital with a team is lower than the bar for me to deploy my capital with a traditional equity security because. When I was doing traditional long short equity, I was thinking about how much money can I lose? Could you trade down 20%, 30% whatnot. Here I'm thinking about, okay, I know that my money is buying your shares and you're holding the capital in a trust account, and that's earning interest.

So my, my downside is covered. So now I'm thinking, are you the team that can generate upside? And so that's digging in. And it starts off with, are you a serial sponsor? And if you are, how have your prior deals done? And it's even more nuanced than that because it's how have they done before your deal closed and how have they done after they closed?

Um, because you have a couple of these deals that trade poorly afterwards or better afterwards versus before. And since I know I'm most likely going redeem, I want that optionality sooner rather than later. I'll give you an example. You look at a team like Churchill, um, Churchill, just, uh, IPO, their 11th SPAC in their franchise.

Um, and you know, to be fair that they've had mixed results, but they have a high, uh, percentage of completing a transaction. They have a great track record of raising capital. So you feel good that good things can happen and in their 10th back, um. Which is called Churchill 10. Um, they did a great transaction and the stock right now is trading at $14 and 50 cents.

And so, you know, you, you had to pay up because they're a premium sponsor, but in this case, you were rewarded for that. That's, that's not always the case, but again, everything is underwritten in my mind through the lens of, you know, I know what the downside is and so like, how do I find the right teams to gimme the upside?

From a portfolio standpoint, you really wanna have that balance of, I want the guys that maybe offer more attractive yields based on where they're trading, but I also want that upside optionality as well. 

Joshua Wilson: So looking for that upside potential. You're right. SPAC investor coming in at that space in the spac, not the at-risk capital.

Talk to us about the difference between the, the downside protected versus the at risk. 

Louis Camhi: Sure. So the at risk, going back to your analogy of the private equity gp 

Joshua Wilson: Yep. 

Louis Camhi: So now you're in the gp and so at Risk Capital gets raised anywhere between one in $4 per share. Um, and so if you're, if you're in the at risk, you're now backing a sponsor team to go out there and execute on the SPAC merger.

If they execute on the SPAC merger and you know, and the shares stay at the $10 a share and you're in at that one to four, you have a great return. Uh, if the stock trades up, obviously that's a better return, and if the stock trades down, that is a worse return. The considerations you need to be mindful of.

Are that in a lot of these transactions, these sponsor economics may get forfeited or deferred into an earnout. So like I mentioned earlier, where targets have gotten smarter is if you don't deliver real expertise or capital, they're gonna say, okay, we want you to forfeit half of your promote. And so if you're in it, you know, $3 a share and now you forfeit half to promote, that's really $6 a share.

And so those are the little things to be mindful of. Also, there's usually a lockup anywhere between six and 24 months for the sponsor. And so if you invest in the risk capital, you're a party to that. And so for, for like my fund, one of the reasons we don't love risk capital is, you know, if you provide the risk capital for a SPAC with a two year duration, and let's just assume that they close their deal a year and a half in you then may have another year to go.

And so I'm just not that patient of a guy where I want to invest and wait two and a half years. Also, it's, it's a pretty passive investment, right? You, once you write that check, you have no control. It's not like when you're trading the underlying parts where you would say. Hey, this one got cheaper. I'm gonna buy more.

This one got more expensive. I'm gonna sell some. Um, but if you back the right sponsors and you're getting in at $2 a share and they're doing deals that go to 10, I mean, if you five x your money in that, you know, two and a half, three year period, that's a great return. 

Joshua Wilson: Yeah. Wow. This is pretty cool. How'd you learn about SPACs?

Louis Camhi: So, funny story, I, this is back in 2014, 2015. I was at a long short equity fund. And I had a buddy who was working on a spac and he called me up one day and said, Hey, we just announced this transaction. I don't know what I'm allowed to tell you about it, but I think it's pretty interesting and you should take a look.

So I took a look and I agreed with him. His deal was really interesting, but this was my first time looking at the components of SPACs and you know, looking at the common and the warrants and the units and, you know, no good deed goes unpunished. And so as I pitched this to my boss at the time, he said, congratulations, that's facts to your list of responsibilities.

And so, you know, I started following it there. And at that point I was really focused on the warrants because this was, you know, 2015 was pres maturation. And what you would see in the warrant was they would all trade it around 40 cents before a deal got announced, a dollar at announcement, and $2 a close.

And I remember thinking to myself like, that's too good to be true. Too easy. And so the next time I saw SPAC deal, I bought 500 bucks of the warrants and watched it go to a dollar and then two. And I was like, wow, this is, this is so easy. And so, and obviously it never is or, or it is until it isn't, I guess is the right way to say it, right?

And so I left that fund and went over to Citadel and I was, uh, running a, a FinTech portfolio over there. And at that time, they didn't let you trade SPACs if you were on a fundamental team. And so I was able to, but they would let you trade 'em in your personal account. I was able to keep following along and it was great because at the time FinTech was very big for SPACs and so I would go to a conference for my regular day job and then I'd meet with all these companies that were going public through spac and you know, decided that after two years at Citadel, you know, Citadel's great.

Learned a lot there. But there's something to be said about, uh, going hunting where there's fewer hunters. And so that's how I decided I left Citadel, had a one year non-compete and decided to focus exclusively on SPACs. 

Joshua Wilson: What'd you do in your one year chill period, or, or are you allowed to talk about it here?

Louis Camhi: No, I am. So, you know, most people in finance, when they have their garden leave, it's like the time of their life. 'cause they're going from one job to another.

Joshua Wilson: Yeah. 

Louis Camhi: For me it was no, I, I had this idea that I wanted to launch this fund and so it was just a tremendous amount of stress because it's not like you're going from.

Citadel to millennium and you've got a nice guarantee and you know exactly what you're going for. I was pivoting completely, kind of, you know, trying to figure out if I could do this on my own and you know, so during that time was the SPAC bubble, which was great for me. Like I had the most fun trading.

Never before. Um, just, and it's funny because people would ask me like, can we see your portfolio? When I was raising money for the fund? And I would say no, because like, this is not sustainable. This isn't real. Like I don't want you to hold me to these returns. Um, and so that part was really fun. But the part of like, okay, I'm gonna try to build a business for the first time, and you know, it's really nice that I've got a good reputation amongst the investors that I know from the industry.

In the fundraising community, no one as a clue who I am. Yeah. Candidly, that's still my challenge to this day. But you know, all of a sudden, like you realize I don't know anything about operations and now I have to hire someone to do my operations and you know, I have to figure out fundraising and I have to work with the lawyers.

And so you realize the appeal of some of these larger shops where they just say, Hey, sit in the chair and trade research and trade. Whereas here, that's only part of it. And running the business is the other part, which some days is great. Some days it's a little frustrating, but, uh, certainly a very interesting, uh, learning experience for anyone considering it.

Joshua Wilson: So most people go from one, one job to the next. Right? You had this time where you're going from a job to your, you know, being your own boss, and now you have to figure out all the components in, you know, the model of, you know, you, you understand how they work, but now you gotta learn how to raise capital on your own for this.

Right. Talk to us about your journey there. Like what, what are some of the things that you learned while, while raising. 

Louis Camhi: Well, I'll start off with my wife is the boss. You know, I just work here. Um, yes ma'am. But that side, you know. Raising capital is really difficult, and I get it. There's some guys that are really senior at the citadels and millenniums of the world where it's a little easier, but you know, if you're not a well-known name, it, it's challenging.

And so for me it started with, okay, let's get out there with friends and friends of friends. And to this day, that's the largest make of our investor base. Um, you work through the different trading desks and they all have cap intro teams, and so we've gotten some. Really great introductions from, you know, our various trading counterparties.

Um, but besides that, to be candid, that is part of the equation that I haven't cracked yet. Like we've, knock wood, had good performance the past few years. Um, you know, SPACs to be fair, are still not, not loved, and. You know, the amount of, uh, misinformation on CNBC is, is mind-boggling. Like when you talk to guys that invest in SPACs, they'll light up at how amazing this instrument is.

And then when you see it on CNBC, they'll tell you this is the worst thing. Yeah, exactly. And so, um, and so there's an education process involved. I do think that that's challenging when you work in an industry where a lot of people think they know everything and you have to tell 'em what you think is wrong.

That's a really difficult, you know, starting approach. Um, but you know, from my standpoint, it's a lot of it is, you know, keep your head down, keep putting up good returns, um, trying to find appropriate opportunities for pr. I'll, you know, for myself, we're one of the sponsors at a conference where we'll speak and try to, you know, tell people about why we're excited about SPACs.

Um, but yeah, I mean it's, I I joke around, you know, fundraising is the white collar version of sitting on the corner and shaking your change cup, like you really feel like you're begging. I, for me, it's a critical part of the job and it's the part that I, I don't like the most. And it's interesting because I've had conversations with.

Other funds and other, you know, capital raising folk. And you know, the big debate is who adds more value? The manager or the, like, capital raising team. 

Joshua Wilson: Yeah. 

Louis Camhi: And when I started I would've told you like it's all about the manager, but now I tell you that's not true. You know, a manager with no access to raise capital, like you only get so far.

If you're only on the capital raising side, without a good manager, you can't raise capital. And so, um, it's something more synergistic. But I'll tell you like we, we talked to a lot of placement agents and you know, you say SPAC and they'll say, I, I saw that on CNBC. And right then you'll be like, no, that's not it.

But it's, you know, it's an uphill battle. But, but that's okay. You know, some of the. The, the interesting thing for me that I've noticed is some of the challenges we've had on fundraising and the education side likely have created the same opportunity set for us on the bridge financing side for sure.

Because even institutions are less familiar with the SPAC process. A lot of them won't get involved in between the announcement and closing of his SPAC transaction. And so, you know, we've kind of found a counterbalance to this frustration in the bridge financing side of the business. 

Joshua Wilson: Um, super man, I, I love how honest you are.

Uh, there's the aspects I think that different people, different personalities, like gravitate to in an operational fund and, you know, you have some personalities that really, really do well in operations, and then you have some that really do well in sales or biz dev or, you know, IR or something like that.

Um, and it, and it's very cool. Like what, what part of the process do you find the most joy in Louis? 

Louis Camhi: Um, that's a great question. I just like knowing that I am executing in a part of the market that a lot of people either don't know, exists or don't understand at all. Yeah. And, um, you know, I like it all.

Like I, I mean that, I know it sounds like a canned answer. I mean, finding a good investment. Anything has always been, uh, a thrill to me. And so it could be as simple as people are missing the fact that this SPAC is targeting a close in, you know, Q1 and therefore it's yielding eight and half percent right now, and I can, you know, finance that at 4% and lever that up and now all of a sudden I've got this tremendous, you know, annualized return backed by treasury.

That gets me excited, um, working on these bridge financings where, you know, it's more hand on and you're both investor and advisor and you're getting companies across the finish line. That's really exciting and there's a lot of, you know, potential upside there too. And we were involved with a company that pivoted from a spac transaction back last August to an IPO this June.

That's been great. We're working on, uh, a couple now as well. Um, one of which is supposed to have an IPM Q1, another one, late Q1, early Q2. Um, another one closing a SPAC transaction Q1, and so kind of getting hands on and helping, you know, some of these business owners achieve their capital markets results.

It's really challenging because, you know, the capital markets are not built for small companies. And so getting involved there, both on the education side and making introductions like that, that's really fulfilling when you get to kind of take it the full spectrum. Um, so yeah, despite what they say on C-N-B-C-I, I really enjoy everything in the, uh, SPAC ecosystem.

I mean, listen, I will say the frustration to me. Just, and this is more of an ecosystem thing, is you will see poor deals get done. And that's also a function of you have a lot of SPACs out there. Not everyone deserves to have a spac. Um, and so, you know, they have a choice. Do we liquidate and lose our money or do we do a deal that's maybe suboptimal?

And unfortunately that happens a lot. 

Joshua Wilson: Yeah. 

Louis Camhi: And when you see the bad deals, those are the ones we talk about on CNBC. Now, just as a reminder, you can still redeem and get your money back plus interest. So you may, you won't lose money in that unless you kind of roll into the deal. But they'll look at those and say, oh, look, like, you know, 99% of the investors redeemed and the stock traded down.

And so, you know, that's just more from a, an industry marketing standpoint. Uh, not ideal, but again, like. It's pretty rare where you can invest your money, know what your downside case is, and by the way, that's a positive number and your upside case is that plus x. And you know, I, you could tell I, I very much like the product and think it's misunderstood.

Joshua Wilson: Yeah. All right, so give us, give us something that you learned about investor relations, right? Because you, you have the LP model squared, right? So you're, you're fund people are reaching out to you to get capital for their, their SPACs, right? So you get to see their investor relations, but you also have to, you know, do your own investor relations and reach out to groups and, you know, so like you're.

You, you're, you're LP squared, right? You're ir squared, essentially. I like that. Yeah. You're ir squared. So walk us through a few things that you have seen really well that worked for you or for, you know, groups reaching out to you for capital. 

Louis Camhi: I think on my side with my LPs and potential LPs, patients and persistence are key 

Joshua Wilson: uhhuh.

Louis Camhi: Uh, those are two characteristics, well, the patient's part that I struggle with. But you know, you need to know that this is like marriage right On your first meeting. It's a first date. You shouldn't expect a check. Um, and if you showed that I. I'm clearly not the right salesperson for that, but you know, there's just really a lot to learn and you need to be comfortable with both parties.

You don't wanna invest in someone who you think at the first time of trouble, they're gonna run away. Um, and similarly you want them to be very comfortable with you. And so for the most part, we've been able to build really strong relationships with our investors. I mentioned, um, you know, a lot of them are friends and friends of friends.

We have a very large institutional SMA. We've now been partners with them for three years. Very great, um, relationship. I don't mind talking to my investors whenever they want. I mean, people are respectful of my time, but you know, if you get your performance report and you have a question like you call me, email me, whatnot.

Um, so on that side, you know, it's, it's, it's just a, a long dance and trying to keep bringing people into your funnel, so to speak, is, is key. And, and you never know. I mean, I was talking to an investor for a few years and all of a sudden they said, Hey, guess what? We went to committee and, uh, we're approved.

So we're writing you a check. Awesome. I like if you asked me a week before, like, do you think you're gonna get money from that investor? I would've said like, I don't know. Like, I've been talking to them for a long time and we'll see. Um, and so it, it's, the hard part is, you know, you have a finite amount of time for someone like me.

You've got the operations, you've got the trading, you've got the research, and you've got investor relations. And so you have to find that balance between, I wanna talk to all my investors and potential investors, but I don't want them to take away from returns. And so that the time management is, is important.

On the other side, you know, again, it, it really depends if, if someone's, you know, if you're talking to someone in their IPO, you know, you know what the downside is and so you're looking at their IPO and you're saying, Hey, I think these terms are attractive and it's gonna trade to 10 0 2 or 10 0 3 anyway.

So I don't really care what you have to say. Or you'll talk them and say, okay, your terms are really skinny and you're probably gonna trade down. Are your terms skinny because you're really good, or your terms skinny because you know an investment bank is jamming you through. And if your terms are skinny because you're good and you trade down, you know, maybe we won't participate as large in the IPO, but we'll be there ready to buy it on that day at a discount.

Um, and then similarly, like, you know, at that point we, we track all these deals and all these sponsors and so we'll see, like if they announce a deal, we'll do a call with them and. You know, they'll usually say, okay, like, would you be interested in a pipe? And we would say, you know, that's not really something we do.

Um, and, and just by way of background, you know, I think pipes are a great product if you're a larger fund. Um, if you're a smaller fund, you wanna be more nimble in your structure. So we'll say, look, we're, we're not really, uh, provider of pipes, but here's a structure we can do, we can offer you. You know, if for a purchase agreement we can work with our partners and offer you an equity line, help you down the road.

Let's talk to you about your warrants. How can you equitize them and gain liquidity outta them? Um, and you know, we, we tend to keep the dialogue going. We're always happy to make introductions. Um, and then, you know, on the risk capital side, it's similar, you know, as, as a smaller fund we'll say. You know, look, we, we don't want to, you know, we don't wanna jump in and take a huge slug of your risk capital than be stressed out and bothering you.

And so what we'd rather do is find other ways to, you know, monetize this relationship we'll own your warrant or your rights, um, and, you know, work together to help you However we can, like we wanna be an industry partner, 

Joshua Wilson: man. When it comes to, um, the industry, like, what's the future of RLH capital? Uh.

Louis Camhi: I mean, we want to just keep growing and just keep doing more, more SPAC transactions.

And look, the, the SPAC market now is up to $35 billion of capital. So if you were to tell me that, you know, constraints are 3%, well that means you could be a billion dollars of gross capital deployed. So plenty of room to grow there. I think on the financing side, as you grow, you have more interesting opportunities.

Like when we do our financings, we really wanna lead them. And so we'll be involved in, you know, call it the $3 million range. But as we grow, we, that could be five and 10. Um, and so look, I think taking a step back. The purpose of the SPAC is to help companies go public. And we're sitting in this environment right now where the IPO markets and m and a markets have been fairly subdued.

And so if you're excited about SPACs, like I am going into 2026, it's because, you know, these private equity firms need to monetize these assets. You know, venture capital firms need to monetize these assets. It's just a huge backlog. And so as those come out, there's gonna be more need for SPACs, more need for capital, more needs for.

Education and potentially structured solutions on the backend. And so I do think that 2026 will be a big year for all of capital markets. Not just SPACs, but you know, SPACs will win with IPOs, direct listings, and m and a and SPACs will underperform with them. And so, you know, it should be a pretty interesting setup.

You know, given the macro here, 

Joshua Wilson: do you think the bottleneck was the economy? Do you think it was a part of the government shutdown? Like where do you think the bottleneck happened? 

Louis Camhi: Well, I, I think you had a lot of market volatility that slowed things down also. And so if, if you kind of look back into, you know, the prior administration, it was just harder to go public and it was harder to come in to, you know, complete a SPAC transaction.

And so under Trump won. On average, it took four months to get a SPAC deal done. And under Biden it took 12 months. And so, you know, different regulatory regime. I'm, you know, I'm not gonna make a political statement on which is better, obviously as a SPAC guy, I want faster, but I want investor protections too.

Um, and so, you know, I think as we went into this year, everyone was super bowled up about capital markets and then you had the, uh, tariff tantrum early in the year. And, and so that derailed it a bit too. But as you sit here now, you know you've got interest rates. Going down, you've got this capital markets backlog.

Um, dare I say stability. 'cause the second I say it, something will happen that, uh, takes that away, right? Right. But you have a pretty, you know, tepid market environment right now. You know, the latest inflation reading was improving and so things feel pretty good right now. And granted, they could turn on a dime.

But you know, as we sit here today, there's about 170 SPACs that they're looking for deals. Um, if you read notes coming out of Goldman and Morgan, they're super bold up on the IPO market. And so I, I think you'll see a lot of, uh, a lot of new paper hitting the market, and then we can get into the hole. Is there enough demand to absorb all that paper?

Well, we've gotta start somewhere and then see, but I can tell you in the SPAC market. The SPAC IPO market has exploded so much. I joke around, it's like the 2022 IPO market without the 2021 deals. Um, and so hopefully they can all find targets or we're gonna be in an environment where there's a lot of liquidation, which is what we saw in 2023 and 24.

Joshua Wilson: Right, right. So what, what is the, probably the, the ideal size of the spac that, that you would, from your opinion, like what's a good size? The, 

Louis Camhi: the most common size we see is one 50 to 200. Good deals getting done that can move up. In the last bubble you did see billion dollar SPACs, 

Joshua Wilson: right?

Louis Camhi: I don't think we get there.

It wouldn't surprise me if you saw more four and $500 million SPACs, but again, it's, you know, what you need to see is you need to see redemption rates go down and an increase in pipe financings. Because if you're a sponsor and you raise a $500 million spac, that costs you a lot of money. I mean, you can make a lot of money, but.

It's not risk free. And so if you want to go elephant hunting to steal a, a Warren Buffet term and find a a $10 billion company, you know, you need to have the conviction. That one, you can find that company. Two, you can retain the money and trust, and three, hopefully you can raise more money. And so as of right now, I, I, if I were the sponsor, I would not have that confidence.

But by the middle of next year, if you see things going well, could you, you know, could you pivot? Like absolutely 

Joshua Wilson: what's the smallest SPAC that would make sense and why? Well, 

Louis Camhi: you see SPACs all the time in like the 50 to $60 million range. Now if they go through the extension process that we mentioned earlier, they can shrink more than that.

But even at 50 million, you know, if, if you go after a $300 million company, I think that's fine. Remember in general you want to go after a, a company that's multiple sizes of the spac. 

Joshua Wilson: Mm-hmm. 

Louis Camhi: And one of the benefits of that, by the way, is it reduces a dilution just mathematically. But you know, you're acting as a conduit to bring a company public.

So you know, you don't want to be a. $200 million back bringing a $200 million company public. 'cause you're not really adding any value. But if you're bringing a, I shouldn't say you're not adding value, but you're adding, you know, you're not helping the company grow, you're catching 'em out if you're net net.

But if you're a $200 million SPAC and you're taking a billion dollar company public and you know, then you get into that IPO Math of you can convince that company, Hey. You know, I know you want a higher price, but you're only selling 20%. Sell to the discount. Reward these investors for coming in. Get that positive flywheel and momentum of your trading price.

You know, that's where the good setups happen. 

Joshua Wilson: Yeah. Now, and if it gets below like the 50 and 60, does it even make sense to do a SPAC versus just say a traditional IPO for the company? 

Louis Camhi: You're saying if the SPAC is below 15 

Joshua Wilson: million? Yeah, like, I mean, what's the lowest SPAC could go? Like could they do a $10 million SPAC or $25 million spac?

Louis Camhi: So I've never seen one, I don't think getting done below 50. But you've seen them shrink on extension pretty small and yeah. You know, what I would tell you is it depends on what your expectation is, right? If you expect 99% redemptions, do you care if the SPAC is a hundred million or 1 million? Like no. And there's an argument to be made this, if they're smaller, there's less sponsor shares, or you can get the sponsor to forfeit them.

And so, and you still go public. And so it really depends on the circumstance now. Mm-hmm. One of the big things that the private company or the target needs to determine is do they need capital or do they just need to go public? Because if you need capital and you're merging with a million dollar spac, you're not really gonna raise capital unless you can find a pipe.

Joshua Wilson: Right?

Louis Camhi: But if you just want to go public and you can go to a SPAC sponsor and say You've a million dollar spac. If it's not going anywhere, you're not gonna find anyone good. So why don't you forfeit, you know, 95% of your promote, but we'll go public in this non-diluted format. You'll own 5%, whatever. Like that could make sense.

But there's no doubt about it that you know the optics matter. And if you're merging with a $200 million full trust spac, it does look better initially at least than if you're merging with a million dollars back that's three and a half years old. 

Joshua Wilson: Wow. Yeah. That's just interesting, like just the, the different strategies and approach to this.

So, you know, Lewis loved having you on, loved talking about SPACs with you. Uh, for, for people listening in, they could always go to the SPAC podcast where, uh, Mike Blankenship interviewed you and you had a bunch of interviews, uh, and. Piece of content there about SPACs. You're very knowledgeable about the space and I think the introduction between us came from our friend, um, Kipton.

I think he's the one who originally, yeah. So shout out to him. Thank you for Thank you. Introductions. Yeah, for sure. Um, Lewis, final question, uh, besides where can people connect with you? We'll go through that at the end. Are there any other questions that I should have asked you during this that I screwed up and did not ask you?

Louis Camhi: Um. I don't think so. Um, I, I think that, you know, just SPACs are a product that require a little bit of education. Maybe now with chat, GPT, and I have not tried this, I probably should have before saying this, but you should ask chat GPT, like what is a profitable SPAC strategy? What is a non-profitable SPAC strategy?

That's. Probably a good way to start clearing up some of the, uh, misinformation out there. But, um, 

Joshua Wilson: yeah, 

Louis Camhi: I, I'm pretty excited about, you know, the next 12 months from a capital market standpoint. And I think, you know, the IPO market will benefit, the SPAC market will benefit, the m and a market will benefit, and if you trade SPACs correctly, you can.

You know, get exposure to that upside optionality with minimal downside. And I think that's very interesting. And if you're worried about the world ending or geopolitical events or whatnot, having some instruments in your portfolio with downside protection is really important. 

Joshua Wilson: Yeah. I. Interesting. Awesome.

So, uh, Louis, we'll we'll include your contact information in the show notes so people, if you're listening in, you wanna learn more about SPACs and you want to have a conversation with Louis, his information will be in the show notes. Uh, we really appreciate you guys listening in to this podcast really about the conversations between, you know, the gps and the LPs and funds and, and the world of investor relations, which we really wanna get to the root cause.

And the root question of why do investors. Say yes. So thanks for listening in. If you have some questions or maybe some points to add, head over to the investor relations podcast.com. Fill out a quick form and heck maybe get you on the show next till then. We'll talk to you all on the next episode.

Cheers, guys.