Billionaire Seth Klarman’s Baupost pumped nearly $200 million into 6 new SPAC bets in the fourth quarter

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Summary List Placement

Legendary value investor Seth Klarman has found a new favorite bet: SPACs. 

The Boston-based billionaire pumped $195 million into a half-dozen special-purpose acquisition companies in the fourth quarter, a new regulatory filing shows. Baupost Group, the more-than-$30-billion hedge fund run by Klarman, put money in SPACs run by hedge-fund billionaire Dan Och, Dragoneer CEO Marc Stad, and Egyptian billionaire Nassef Sawiris, among others. 

In total, the firm ended 2020 with just under $740 million invested in SPACs or warrants on SPAC shares. The firm started the fourth quarter as a prominent backer of well-known SPACs, including those run by Pershing Square founder Bill Ackman, baseball executive Billy Beane, and United Kingdom private equity trio Hugh Osmond, Edward Hawkes, and Marc Jonas. 

But the fourth quarter was when Baupost really leaned into the SPAC boom, spreading the investments across the globe. The firm ended the quarter with a $62 million investment into Och and Glenn Furhman’s Ajax, a $37 million stake into Los Angeles Dodgers co-owner Todd Boehly’s Horizon Acquisition Corp, and a $21 million bet into Investindustrial Acquisition, which is chaired by former UBS CEO Sergio Ermotti. 

Other new SPAC bets included warrants — which lets the firm buy a share at a specific price at a specific time — into Beane’s RedBall Acquisition and Vesper Healthcare Acquisition, as well as an additional investment into Reinvent Technology Partners, which is run by LinkedIn founder Reid Hoffmann and Zynga founder Mark Pincus. 

Baupost also invested $11.4 million into Dragoneer’s SPAC and $43.4 million into Sawiris’ Avanti Acquisition. This takes the total number of SPACs Klarman is invested in to 10. 

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The only pullback from the SPAC craze from Baupost last quarter came in arguably the most well-known SPAC sponsor. Ackman’s Pershing Square Tontine has been linked with big-name private companies since its inception, including Airbnb, but has not found a target to take public yet. Klarman cut his stake in his fellow billionaire’s SPAC by nearly 5 million shares in the fourth quarter, but still owns more than 12 million shares in Tontine.

Klarman originally invested nearly $400 million into Ackman’s SPAC and ended 2020 with roughly $370 million invested in Tontine through shares and warrants. 

Hedge funds tend to make money in SPACs hand-over-fist thanks to various ways they can exit an investment without losing their initial investment, through the agreements like the warrants Baupost uses. Even with this advantage last year, Baupost’s returns were muted, as the firm made less than 5% — less than half of what the average fund returned for the year. 

Baupost declined to comment.

SEE ALSO: Billionaire Seth Klarman’s Baupost returned less than 5% in 2020, failing to break double-digits returns in what’s been called the best year for hedge funds since 2009

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Source:: Businessinsider – Finance


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