SPAC Attack – Welcome to the Starting Line
I have been doing this compensation stuff for a while now. One important lesson I want to share is that you haven’t made it until you have. And to be clear, making it through a SPAC doesn’t mean you’ve made it. SPACs, much like IPOs, are like the Olympic Trials. Winning the race simply means you get to compete in the Olympics. It doesn’t mean you have really won anything on the global stage.
In 2008 Equatorial Guinea sent Eric Moussambani to the Olympics to compete in the 100m freestyle swimming event. He made it to the event without achieving the minimum qualifying time. Heck, he made it without ever having swum in an Olympic-sized pool! This, of course, was a personal accomplishment to be proud of, but it didn’t mean he was ready to swim in a real competition. In fact, his time in his only race was nearly double that of the eventual gold medal winner.
Eric went to the Olympics for the experience. He was fully aware that he was not competitive and understood where he stood relative to the full-time, life-long, competitive swimmers from around the world. Over the years I have found that many IPO and SPAC companies and their employees are much like Eric Moussambani, but believe they should be treated and paid like Michael Phelps. To them, I say “Welcome to the Starting Line.”
As hard as being a pre-IPO company can be, there is little else like the scrutiny you receive as a publicly-traded company. At a private company, you do what is legal and what your shareholders will support. Usually, those shareholders are very close to the company and see themselves as integral to the company’s success. When you are traded publicly the shareholder experience is far, far different.
First, your competitors are the other publicly traded companies. Think of the biggest company in your industry. THEY are your competitor. Think of the compensation professional you love to hear speak at conferences. The one who has the experience and insight you hope to have someday. They are now your direct peer. Most importantly, think of the companies you have heard go public and soar over the past decade. Nearly every one of your executives and employees views that that the only example for their own success.
It can be hard, but it is absolutely necessary, to temper expectations. Yes, a SPAC is an exciting opportunity. No, it is not a guarantee that people are going to get raises, or that their equity compensation is going to be worth millions. Yes, the stock price may jump up and valuations may seem dreamy. But there is no guarantee that the price will stay inflated, and no way to know if or when it may fall.
Rather than stress the inherent risks in a quick path to IPO, try to remind people who they will be compared to once the company is publicly traded. Provide your staff with examples of companies that have weathered five or more years of post-IPO media and investor coverage. Explain what those companies did right and how your company can do similar things. In the end, a SPAC is just an invitation to the starting line. How you run the race depends on preparation, execution, and just a bit of luck.
If you have any inquiries about HR Operations, equity compensation as additional pay and incentives, please get in touch with FutureSense - HR Consulting Services. We are specialists in helping businesses develop initiatives focused on success and growth. We might collaborate with you to manage your staff by providing advice and support.
Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He works as Managing Consultant for FutureSense. Dan is also a leading expert on incentive plans and equity compensation issues. He has written several industry resources including a resource dedicated to Performance-Based Equity Compensation. He has co-authored ”Everything You Do In Compensation is Communication”, , “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or follow him on Twitter at @DanFutureSense.
