Legendary investor and Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) Vice President Charlie Munger is no fan of Special Purpose Acquisition Companies (SPACs), the hottest trend on Wall Street for bringing young companies to the stock market.
“The investment banking profession will sell s — as long as s — can be sold,” Munger, 97, said of PSPCs, responding to a question at the Daily Newspaper Corporation (NASDAQ: DJCO) annual meeting in Los Angeles Wednesday.
SPACs have become a popular way for companies to go public and avoid the normal roadside scrutiny that accompanies a more traditional initial public offering. Fans say the process is easier and gives companies better access to additional liquidity, but Munger said he believes it is a way for start-up investors to take money out of speculative companies in using less sophisticated retail investors.
“I think it must end badly, but I don’t know when,” he said.
Munger, who is also chairman of the Daily Journal, is known for his frankness. During the meeting, he referred to Warren Buffett’s admiration for the banking industry as an explanation for the decision to keep the Daily Journal. Wells fargo (NYSE: WFC) shares even as Berkshire Hathaway sold part of its stake.
“You can understand why Warren was disillusioned,” Munger said. “I’m a little more tolerant … I don’t expect bankers as much as he does.”
Munger also said he was never tempted to buy General Electric (NYSE: GE), a former outfielder who almost collapsed during the financial crisis because he never liked culture.
“I was not surprised when it exploded,” he said.
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