Inside the SPAC Playbook: Research, Capital Strategy, and Building Real Alpha | Peter Wright

Joshua Wilson: Good day everybody. Welcome to the Investor Relations podcast. Super grateful for you. Last year, you have seen tons of different shorts on this. We leveraged what we call the short strategy when we're launching a podcast or a media channel where we do the frequently most asked questions and topics that you have.

In regards to that specific topic, this show, we have a network of shows, but this show specifically is on investor relations. So we interviewed IR professionals, we interviewed issuers, we interviewed bankers and attorneys, and all sorts of people. The top questions that we could think about. We recorded those in short, so if you go to our YouTube, you'll see a bunch of shorts a answering those questions.

Now, in phase two, in our growth phase, what we're doing is we're diving deeper into topics with people who are in the trenches, in the IR world, whether issuers, bankers people who do the work day to day. So with that great honor to interview Peter Wright. We interviewed him through our SPAC podcast, so you could listen to his SPAC podcast with famous Michael Blankenship.

But today we're gonna dig into the IR side of spac. So Peter, welcome to the show. 

Peter Wright: Thank you so much, Josh, for having me. 

Joshua Wilson: Yeah, man, it was so fascinating sitting behind the scenes, producing that episode with you and Michael and talking about some of the things that you're involved in.

Kind of give an overview of the different aspects of businesses that you are currently involved in. Peter. 

Peter Wright: Fantastic. So there's really three things that we do. They're all related even though it might seem on the surface they're not. Intro Act is my research company and it really is a background for 20 years.

I'm a research guy by passion and by, by background. Sell side guy for about six years, buy side analyst for about six years. Director of research then ran research sales. So I saw research from lots of different angles in 20 years and started intro Act about six years ago. And it's really a technology company that is issuer facing.

So we help issuers become more investor ready. So we sit right alongside IR firms or the IR. Professional within a company, helping them with their investor readiness. Second company is Partner Cap which is our broker dealer. So whenever we're helping an executive team, an issuer raise capital in the primary market as opposed to the secondary market gain, gaining attention.

Obviously that runs through our broker dealer partner cap. And then the third one was the episode that you referenced, which is we have done a tremendous amount of work with SPACs over the last five years. That's been our focus area. We launched our own spac McKinley Acquisition Corp, August 11th of last year.

And so we're in the market for our own target. 

Joshua Wilson: Very cool. So within that, there's something that you run called spac Monthly Monitor. Give us an overview of what that is. 

Peter Wright: So the SPAC monthly monitor is is really intended to be a cup of coffee in about 20 minutes of of a professional's time to understand everything that's going on in the capital markets related to spac.

Whether it be IPO traffic, whether it be. D spac situations or merger announcements along the life the, along the life of a spac, we're looking at what the trends are, in a marketplace where it is relative to equilibrium and how healthy it is. Readership on that.

It's actually distributed over Bloomberg and FactSet and all the different venues that you would expect. It's about 800 professionals consume that piece. Every month it's, it is got a pretty good mix of both issuer as well as investors consuming that piece right now.

Joshua Wilson: Yeah. Super cool, Peter. Before we dive into, the day-to-day aspects of, investor relations when I asked you this over our last conversation, I said, give an idea in terms of how much you've raised, in your career. And you're like Josh it's not that much.

There's people who have done a hundred percent more than us, or a thousand times better, whatever. Give us an idea of how much you've raised in your career, Peter. 

Peter Wright: Yeah, so I the difficult part of that question is I've worn different hats. So when people say how much they raise, they're often sitting in the banker seat.

And being the research analyst, I had a role and had participated in billions of dollars of deals. If I look at it that way sitting alongside advising. The banker and the issue were on those deals back when the world was different. Pre-reg fd when analysts were very much involved in banking, which is when I was doing the sell side we did a lot of deal flow back then.

I think that my differentiation is not, and not I'm not dodging your question, it's billions of dollars, but it's single digit, billions of dollars. It that I've been associated with. But it's I think that what I pride myself on is not the amount of money that I've raised. It's really that I've seen it from so many different angles.

So I've seen it from the sell side analyst. I've sat at Fidelity buying a lot of deals, billions of dollars of semiconductor and semi equipment positions. That are coming to market. So I've seen it along the way, been an advisor to companies in somewhat of as an IR advisor capacity, which is what Intract does at the beginning, and of course as a banker.

So we've seen it from lots of different angles and I think that's, the value of of what we can bring. 

Joshua Wilson: Yeah. Mr. Peter, what I love about this is, your humility in this, bees are a lot, right? Billions are definitely a lot. And you've seen it from many different aspects of this.

And, I wanna honor you in the amount of deals that you guys have done and observed and researched. You mentioned research is a passion of yours. You wouldn't hear a lot of people if, what's your passion? I like golf, I like this. Like research. Why research? Why is research your passion?

Peter Wright: The single biggest joy I get, I think professionally is actually, it is, it's more personal maybe than professional at this point in my life. But used to be only professional, when I had no money and I was doing it for other people's money, but I, you find something and you're validated that you found something before everybody else appreciated it.

That's some of the, it's worth more than the money it makes. Sometimes it's just that feeling of being right, being able to research something. Have a thesis, investment thesis on it and really see it play out the way you think that it's going to. That's the satisfaction that is probably the best professional satisfaction I've had.

Joshua Wilson: Yeah. One thing I love is in, you know the book Good To Great. Where it talks about the Groundhog Principle. It talks about, you, you have something you love doing, something you could be world class at, and something that there's some type of economic driver. You said before I had money and I was doing it for other, other people, but you learned how to turn that into your own economic driver, right?

And it became your Groundhog principle and you said it's become my great, one of my greatest. Joys give us this idea through the lens of deal maker investor relations, like how can we, what advice do you have there just in Groundhog Principle for maybe people trying to find their true passion and joy in life, but then also how do you find things before other people?

Like, how does your mind work in maybe finding those gems? 

Peter Wright: So that's a great aspect of what we do that I'll simplify to really two things that I look at. So when I look at the marketplace. One part of it is very crowded and it's a lot of people are competing against you, which is finding trends.

So we focus on progressive industries, so the sexy industries that are really growing a lot, and that's what we enjoy doing. But lots of people, focus on sexy industries that are growing a lot. But finding the underlying trends. Within clean tech, small modular reactors might be a growing trend within a financial sector.

The movement of money how you're betting on money crypto is an example, and how blockchain is revolutionizing kinda the financial industry and tokenizing, and securitized, tokenizing everything. That's a trend that you can play. What I think fewer people look on is when a trend gets extrapolated.

So not to get all math nerdy on it, but a second derivative move happens. 

Joshua Wilson: Yeah. 

Peter Wright: And it either accelerates or decelerates. What I really enjoy looking at is making a call right then and there. Is it gonna mean revert to trend? Or is this a trend change? And so a really good example of this coming from a semiconductor guy is Nvidia.

So if you look at Nvidia, this is a case study on a growth story. If you look at X 86 processors and Intel's dominance, it moved to parallel processing on the graphic and processor side, TP side. And the question was, how big was that gonna happen? It was big, and it existed for over a decade before NVIDIA's real story happened.

And what really happened underlying that story, was an extrapolation of growth so that cadence of Moore's law accelerated on the GPU side. As soon as that happened, there was a change in growth curve, and there was a technological reason that you could look at and say it's different this time.

This is not gonna mean revert. This is gonna be a new trend. So when you can identify that and build a lot of confidence in it, you can make a big bet. And then analyze the ecosystem behind it. So that's a good example of a stock that and a story that you know is what we look at, which is a trend.

Trend is your friend pick something that's got positive momentum behind it. But then, after that, that's, that the market's pretty efficient. You might make a little more money on that if you're a growth investor, but where you really make outsized money is when there's a move off of that trend in either direction and you're making a call for it to either mean, revert, or break to a new trend.

And that's where real alpha is generated. 

Joshua Wilson: Oh, I like that. I think we should dig into that, right? That's where real alpha on that second derivative of the bell curve, right? Like I, I forget, was it the book Outliers that kind of talked about the growth trends? So it might've been that, forgive me if I'm off, so we see it, we see a spike and we're like, oh, this is interesting.

And we, like we saw that with Bitcoin, right? The spike and then everybody's, oh, it was just a trend, but then boom, that second one was even bigger than that first. Right now we're seeing a, maybe a correction or who knows, who cares, right? But like the. How do you know when it's gonna go up or if it's gonna be the pet rock and drop?

Because you can make money in either of those kind of like changes shifts. But how do you go, I think this is gonna go up. I think this is gonna go to the next level of the mountains, which you name all of your SPACs In terms of mountains and stuff we get into that. But what, how do you look at it where this one may go up next?

Peter Wright: There's gotta be a fundamental reason. You know what we really try and do. Is get away from the sentimental feeling of it. It's like technical analysis. These guys are sentiment guys. People think I look at a chart and you read the sentiment. Is it positive or negative? A good technical analyst.

Never is really predicting off of an event to come of how it is. What they do is they just tell you what the chart already has. Backwards looking, they're looking at the facts of where the chart is to today, and then extrapolating from there. A good example is a technician gonna tell you directionally how to play an earnings call.

Palantir is reporting on Monday, should I buy the stock? Technical analysts tell me, technical analyst is gonna be able to say, I think it's gonna be a 10% move in either direction. And this is the chart and here's the odds you know of it. But after it makes that move, that's where technical analysis is very valuable.

Is that trend sustainable? Is that trend properly extrapolated from what you should expect on that type of move? And that's the same way we look at fundamentals is, is the move proportionate to the news. The market is very efficient in the long run and very inefficient in the short run.

And alpha is generated on understanding that delta, so short term moves and short term is depending on your trading cadence, different for everybody. But the short term moves are really where Alpha's generated the long-term trend. If you look at fundamentals and you look at stock price, it's right on top of each other.

The same name over the long run is gonna trade at roughly the same multiple of fundamentals. Yeah. Yeah that's the fun part for me. 

Joshua Wilson: Talk to us about in your journey when you went from, Hey, I have no money. I'm doing this for other people, to the first time you were truly validated financially, and you go, oh man, I have to play a different game now.

Now it's house money that I'm starting to make these, these wagers with. 

Peter Wright: I, probably the most interesting journey that I've had on my own investing side has been and part of it is the market. I hate to say it right now, with, where I believe we are. But I used to like to play small caps and say, Hey look, it is an inefficient market and some of these small caps can be really exciting and I can get an information advantage over everyone else.

Part of it is, and this is a whole nother thesis I have, we're living in the second guilded age. We might not admit it yet, but we live in the second guilded age monopolies rule. Large cap companies, the mega cap companies, have a lower cost of capital and can just make an unbelievable number of mistakes and still outperform and consolidate, share and leadership in their space.

So I think playing big matters in the world that we have right now. But and that's a journey that I've had is, trying to stay away from the micro and stay more towards the obvious, so consistent, consistently being right on the bigger cap names is what I've focused on.

I think. The o the other thing is consi, what I would say is that's the diff that's the change in my processes from small cap and micro cap to large cap. What has been consistent is lower volatility. I was professionally trained by people way smarter than me. There's investing and there's trading.

And you gotta pick what you are and you gotta stay systematically driven to what you are. There's a lot of traders that make a lot of money. Steve Cohen is a good example of a trader mindset, and he's a, he's an awesome trader and better than me, actually, my, one of my favorite bosses is a really good trader.

Ali Irani was my mentor. He was my sell side analyst and mentor that trade me a lot. He's more of a trader. He's always been a short-term focused guy, can play earnings trends and extrapolate it. I am a long-term guy, so I like finding that trend. Playing that trend and then just moving a little bit of money around that trend on the outliers.

Whenever there's an outside move, more in the standard deviation move. I'm paying attention directionally what happens next. 

Joshua Wilson: Yeah, super cool. It's knowing who to th I know self be true. Know thyself whether you're an investor or you're a trader. Because if you're an investor but you're acting like a trader, you're gonna lose.

If you're a trader, acting like an investor, you're gonna lose. Be honest with yourself or choose which one you will be. Really will. It's hard to, it's really hard to play both sides of that. And then playing big matters. That's why we're talking SPACs, right? Because, these are large transactions, $250 million.

SPACs then has to go after an acquisition of, what's an acquisition size in terms of enterprise value that you guys are looking at. 

Peter Wright: Typically about five times, whatever your trust size is. So our trust is 172. So 800 million, a billion, let's just say a billion dollars is the transaction size we're looking at.

Joshua Wilson: Yeah. Yeah. So playing big matters because we're in the second gilded age as you referenced. So man, we can, we could all day long knock on micro cap doors with, that, that kind of capital, we could raise that man. It would be very hard to manage and deploy that. But you're going, we gotta go bigger.

Spac is the route you chose in the spac. World. There's a few different capital raises that occur. Walk us through maybe the different capital raises within a spac, up to maybe a D spac or maybe even just a little bit after, and maybe what are some investor relations things that you have discovered that may be helpful for the people listening in on the IR side?

Working on SPACs. 

Peter Wright: Phenomenal. So a SPAC is a partner that comes to an issuer and says, I'm gonna help you develop a capital market strategy more efficiently than you can do it in any other way. And I'm gonna do the first chapter of your book for you, and then you're gonna come in to the transaction because you only have to do that once in your life.

So you're not gonna have to worry about it. But I'm gonna help you on the journey forward, which is a rinse and repeat, multi-cycle, capital raising type program. So a SPAC starts with a sponsor team coming to market and doing the S one, filing your initial IPO. So we're gonna create a public shell. We're gonna work with the SEC and say, here's a team that wants to create a legitimate shell, and we're gonna have a business and our operating business, we need to have business.

Our operating business is to find a target. That's what a SPAC is. Our, we're gonna raise money and we're gonna find a target. We actually raise two different types of money. Every SPAC is the same. They raise an operating capital budget and they raise a trust. So a SPAC is demonstrating the SPAC sponsor team is raising visibility to their ability to raise capital.

And interact with the SEC and interact with the capital markets ecosystem. So SPAC sponsor needs, relationships with an exchange, lawyers, accountants IR firms themselves. The ecosystem of what you need for a capital markets mandate is built proxy firms, all of the technology firms to help you on, on, on communication there.

Everything you, you basically put together, for them and the trust. Account in our case was 150 million with a green shoe, 15% green shoe, which is why it's 172 point half million is in full disclosure, fairly easy money to raise because the world today is treating that like more of a fixed income product.

It's money, market money for the most part city, right? 

Joshua Wilson: Where you could redeem and get your money back, but you have that redeem potential. 

Peter Wright: Yeah. Worst case scenario is you get money market return plus. Either the write or warrant, depending on the structure of the spac. Yeah, as a bonus for doing it this way, which is why every SPAC is virtually four or five times oversubscribed, right?

Infinite money for them. Right now, the second bucket of money is much more difficult. It's a SPAC sponsor saying, I can get a deal done. About half a deals fit, 50, 60% of SPACs get done. 40% fail, on a five year look back. I think that's gonna change. There's just too many of them in the last cycle.

I don't think that's the right ratio, but that is the ratio and a look back over the last five years. You gotta bet on a team that has a formula for finding good targets. Being able to get a well-structured deal with that target and help them succeed in the execution of their journey to become a public company.

So those, and which includes raising capital and doing all the parts from a governance perspective to, to make them public. That, that capital is five to $10 million depending on the team that you're raising to do that. And that budget, the risk capital, is to pay lawyers, to pay underwriters to pay accountants to pay everything that keeps the business model going.

SPAC sponsors are not getting paid themselves. They're always money in, for the most part we're speaking, I'll speak for myself, but most SPAC sponsors are exactly the same. They're money in stock out. Those are the two things that happen. And then we go on our journey to find our target.

Let's say that the average SPAC has got a two year life after they IPO, which is the raising those two funds and saying we're a SPAC that goes live. They have two years to basically conclude a deal. So you announce a you search for a lot of companies. You might send out a couple lois, which is the first step in the process, and that's getting the framework for a deal thought through and done.

After the LOI di deep deeper diligence happens. Maybe you have some investor conversations and you validate the valuation and that the market resonates with this deal. And then you announce A, B, C, A, and that's a definitive agreement that you're moving forward with. Now your S four filing, which is a little different than an S one filing, which is transforming the spac.

Into that dpac, co operating company that yeah, you capitalize. And so you're working on the S four, you're raising capital, whether it be a pipe and you're, this is where ir to the part of your question should start. What you don't want to do is wait for the DS spec to start your capital market strategy.

So the spec sponsor will introduce you, help you interview, run a bake off for lots of different strategies. One of the biggest decisions you gotta make is, are you gonna bring this in-house or are you gonna work with an agency outta the gates? 

There's virtues of both. And different companies are in different situations.

Some companies are much more mature than others that come to market. There is a lot of virtues to working with an agency initially. Any one person will not have the Rolodex, won't have the experience, won't have the depth that a, a better agency will be able to bring you. So I think as a first.

Time public company, I would usually suggest a company should select an agency. And there's hundreds of 'em that you can choose out there different attributes you'd be looking at. I don't know if you, we could go through some of the things that we do, but we do help in advise backs on how to go about selecting that ir, agency.

And from there, you might only need that agency for a period of time. You might reduce what they do for you, and you might bring it in-house, but what you're really having this agency do is build a true capital market expertise. In-house. That's what you need to do. So you need to train your executives on being a public company.

I'll give you the biggest difference that happens between public companies and private companies. It actually has to do with how you go about raising capital and communicating your story externally, not only to investors, but to everyone. Private companies really have to have executive teams that dream the dream and talk, this is where we're gonna be in three years or five years from now, and it's gonna be a five bagger, and here's how we get there.

And the reason they can get away with that, or the reason that's the right way to do it, is a private company is raising capital, is episodic, communication is episodic. The transaction you have. As a company with investors is episodic. And it's, and you're in control of it to some degree. You need capital to survive, but you're in control of kind of that cadence.

As a public company, you can always buy the stock tomorrow. You don't need to buy it today, 

Joshua Wilson: right?

Peter Wright: And so what that does is it shrinks the cadence of every investor in your audience from three to five years. It's quarterly and there's a lot of people that don't like this. That's one of the things you gotta consider when you're a public company.

I don't wanna man it be managed on a quarterly cadence. My advice is don't become a public company, because that's gonna be what you're signing up for as part of this. Because that's the way the world works, is I can always buy the stock tomorrow. I can trade out of it. E even if I like your story long run, I'm gonna put pressure on your stock and drive it down.

So you've gotta have a better story tomorrow than today. Always as a public company. And so it's how you communicate information, how you stage it. There's a lot of decisions that go into it, how you govern the information responsibly that goes out. The rules are different if you're promotional as a public company than if you're a private company.

So there's a lot of things to consider that it's just different when you're a public company. So that's institutionalizing that, that communication process is something that a lot of people think, oh, it's not that hard. It's, there's a lot to it that you've gotta build over the months leading up to that DPAC date.

Joshua Wilson: Yeah. Fantastic. Could we wrestle on something, Peter? You mentioned the different stages of capital raising within a, a spac, potential spac, right? So we have the first raise, which is the at-risk money to set up the sponsors, putting in his own money, maybe friends, families, groups, syndication coming in.

Setting up the, S one, then you have the trust, right? Yep. And then you're raising 150 million bucks to get it going. Then you have the second bucket of race, which could be a pipe or some type of follow, event to get the machine rolling, right? So there's different stages of capital raise.

Now, the official agency or in-house ir. Maybe we'll start around that second bucket where the BCAs, s Force filed. Yes. But there's a lot of investor communications that happen with that initial, Hey Peter, you and I should start a spac. We're already doing ir, we're already doing investor relations.

But it's just not the way you would do it for the trust stage or for the, so talk to us about maybe some initial investor relations. Strategies or conversations you'll have in that very beginning. We're looking to launch, we're looking to get going. We need very strategic, smart people to get going on that.

You know what I mean? Am I off thinking a hundred 

Peter Wright: percent? Here's the, an easy, fairly easy way to think of it. So the SPAC is gonna come to a, an issuer, a private company or a foreign company and say let's become a new company together. And they're gonna say, I've got investors in my trust, and they're gonna say, this is some of your initial money.

The reality is they might have 30 investors there. What are the odds that those 30 investors want? That specific asset at that specific time, the odds are against you, just realistically. So an IR firm steps in and says whoa. Let's take a step back and create a capital markets discipline.

And that's the five step process that Interact really talks about. Which is saying, there's gotta be a systematic way about how you engage and convert investors into shareholders. And it's not about taking the 30 guys that are in this vehicle right now and just converting 'em. That's not a good strategy.

A good strategy is figuring out compatibility, what is my story? Who is the best and most likely investors out there to be converted into shareholders today. And so that's the targeting exercise. So that's the five step. Process that we guide issuers through to become more investor ready. 

Joshua Wilson: I think this is so valuable for people because.

They're like, oh, I have friends and family and this guy invested and that lady invested. And let's just say that's the at risk. And then we have the trust and all these people are like, look, I'm gonna park my money here. It's like a bet, but super safe for me. If I don't like the company, I'm yanking my money out.

We see a ton of redemptions because I don't think that people have spent enough time matching that investor to shareholder logic early on. I think, and I might be wrong, that's why we see a lot of failures in SPACs or redemptions. Am I thinking right on this? I'm still a baby in this industry. 

Peter Wright: A hundred percent Josh.

And that's the issue is it doesn't take much pressure because the spac, unlike a traditional IPO, is gonna have a very thin. Layer of liquidity. The float is typically very small on these SPACs that are coming to market. So you know, when you hire JP Morgan or whoever to run an IPO, they take 18 months.

It's expensive. There's other reasons why SPAC makes a lot of sense for some, but the one huge advantage that a traditional IPO has over a SPAC is they typically don't price a deal until there's depth in the market. When the, when a banker says my book was four or five times oversubscribed, what they're really talking about is the depth of the secondary market.

So I raised you 30 million, but I actually identified 150 million of demand for your stock future buyers. Yeah. So the day you started trading, you already know there's buyers in the market. Yeah. SPACs. Often say, okay, how much money do you need to close the deal? $30 million. Okay. And then the bankers, everybody works for that 30 million.

As soon as you got the 30 million, we got a deal done. Then you're on day one and who's there as buyers in this market? The market is smart and they realize I need to see who the sellers are first. 'cause I know there's some sellers. How big is that? Because that's what I'm gonna be balancing against.

And so you've gotta get. That buyer network up, which is why a lot of SPACs d SPACs specifically follow that curve so they stay flat for a period of time, start falling off ahead of the lockup expiration, let's call it six to 12 months, depending on the spac starts trading off, finds a bottom as that selling pressure is released and then the stocks start taking off.

So there's an opportunity in that D spirit curve where it's possibly overpriced to horribly underpriced. To then it finds its right righteous value. But that curve is almost undeniable. In a spac it's gonna happen at different levels of intensity, but it happens just because of formulaically, the supply and demand of the underlying stock.

Joshua Wilson: Man. So good. Peter, I'm so sorry. We, I lost track of time and we're going to, we're gonna run outta time, so I wanna do this. We might come back and do some more with you, but I'd loved digging into the different aspects of a SPAC and research and your story. I'm sure there's more work to do together.

I'm thrilled to connect with you. Where could people in our audience go to learn more about you and maybe even subscribe to the SPAC monthly monitor? 

Peter Wright: All of all of our research is free to the reader. And our industry work is not paid for. It's really I idea generation and lead generation out there.

So in track.com, upper right, you can subscribe to several. The SPAC newsletter is one of 'em, but we actually cover several progressive industries as well. And there's a newsletter and a fairly regular thematic piece, monthly thematic piece that goes out over every industry. Would love to engage with anyone who's interested in trading ideas on our research.

Joshua Wilson: Peter, you're phenomenal. Thank you very much. Ladies and gentlemen, in the audience as always, reach out to our guests, say thank you, have so much gratitude towards the guests who've invested their time into sharing their wisdom and knowledge for you. Now, if you have questions that you'd like to dig into a little bit more, or maybe you'd like to come on the show, head over to the investor relations podcast.com.

Fill out a quick form. We love hearing from you, and we wanted to serve the community by answering these. Types of questions, so then we'll talk to you all on the next episode. Cheers, guys.