Jumping the SPAC Shark, Greenwashing, and Building Productive Habits with Charles Duhigg

SPAC Scrutiny

The SPAC market is facing significant scrutiny as its underperformance becomes evident. Scott Galloway highlights how companies with questionable valuations have used SPACs to enter public markets, often underperforming compared to traditional IPOs 1. He notes that while some SPACs initially overperformed in 2021, a regression to the mean is occurring, with many now underperforming the S&P 500 2. Galloway questions the sustainability of SPACs, suggesting that the market is beginning to unwind.

There's a stench in the air, and it's coming from the SPAC market. It's beginning to smell like teen spirit. If teen spirit smells like bullshit in an overvalued market.

--- Scott Galloway

The reliance on debt to support inflated valuations further complicates the SPAC landscape, raising concerns about long-term viability 3.

   

Market Correction

The SPAC market is experiencing a phase of correction, typical of economic cycles. Scott Galloway describes this as a period where the market corrects itself, often too far, after a phase of mania and overvaluation 4. He suggests that while many SPACs may falter, some enduring companies will emerge stronger from this correction phase. Galloway advises investors to seek companies with genuine financial metrics and avoid those relying on superficial ESG claims.

We have sort of a cycle, right? We have an economic boom, we have innovation, we have incredible valuation increases. We have mania. We have mania.

--- Scott Galloway

This correction phase presents opportunities for discerning investors willing to do their homework and diversify their portfolios.

   

Green Finance

Green finance SPACs, like Aspiration, face criticism for misleading ESG claims. Scott Galloway points out that Aspiration's primary product, a debit card, is marketed with green features but falls short of its grand claims to "change climate change" 5. He highlights inconsistencies in Aspiration's ESG fund, which invests in companies like Southwest Airlines, contradicting its fossil fuel-free claims 6. Galloway also questions the company's consulting business model, suggesting it lacks traditional consulting expertise.

Aspiration claims the Redwood fund is 100% fossil fuel free. However, almost 3% of its holdings are in Southwest Airlines, a company that burns 2 billion gallons of fuel per annum.

--- Scott Galloway

These critiques underscore the need for transparency and accountability in green finance initiatives 7.