Martin Franklin is an interesting investor. He has a fantastic track record, including returns in Jarden, which has to be among the best performing investments of all time. I think he was probably a prime candidate for the next cut of the Outsiders (the one about capital allocation, not pony boy).
He also might be credited, at least partially, with popularizing the Special Acquisition Company (“SPAC”) structure. Basically, a SPAC is formed to acquire a business via a “blank check” and often will acquire private businesses, bringing them to the public markets via a sort of “reverse i.p.o.” This structure is hot right now with a lot of the S.V. set.
In my opinion, SPACs are usually not a great deal for investors because of the incentives paid to the promoters. They often have an incentive to get a deal done and they then recognize a big windfall. For example, a common structure results in the pormoters owning 20% of the post-SPAC enterprise (though the incentives may not be that much worse than a normal IPO, when you think about who is selling and why). Yet, the arrangement has worked pretty well for Franklin’s investors.
Continue reading “The SPAC Daddy: Sir Martin Franklin”
