Microsoft co-founder Bill Gates hinted at a SPAC bubble, noting in an interview with CNBC on Friday that he’ll be avoiding “low-quality” special purpose acquisition companies which are guiding companies into the public markets too soon.
Gates noted that the market has “kind of flipped” from one where companies were staying private too long to one where they were going public too soon. Gates, who is a backer of electric vehicle battery maker QuantumScape, added that he was going to try to stay involved in the “higher quality” SPACs. QuantumScape and Evolv Technology are two Gates-backed companies that have taken the SPAC path recently.
“There will be quality companies that SPAC, and there will be low-quality companies that SPAC, and I am going to try and stay involved in the higher quality ones,” Gates said.
The remarks echo what active SPAC investor and former Zillow Group CEO Spencer Rascoff told us on the GeekWire Podcast last month, noting that: “There are too many SPACs. Now, there are not too many good SPACs.”
You can watch Gates’ remarks below. He appeared on CNBC with former US Treasury Secretary Hank Paulson to talk about efforts in battling climate change, and Paulson can be heard laughing in the background when Gates riffs on SPACs.
SPACs are all the rage on Wall Street and in startup boardrooms, allowing companies to speed up the process by which they begin publicly trading. So far this year, 298 companies have raised $97 billion via SPACs, already topping last year’s totals for SPACs, according to SPAC Research.
Many have been arguing that a SPAC bubble is forming. Last month, Aaron Pressman of Fortune wrote: “These kind of things never end well. I fear the SPACpocalypse is near.”
CNBC and Reuters reported that the bubble may be starting to pop with 93% of IPO prices of SPACs falling below their offering prices in the last week of March.
Even still, Gates noted that high-quality SPACs — especially in the green category where he’s investing heavily — can improve their balance sheets via these financial instruments.
“The markets are saying: This is important,” he said. “Now, we have to be careful on which ones are ready for being a public company, and how early do you take them out.”