Inside the Mind of a SPAC Sponsor: How Good Deals Get Done

Chaz Churchwell: Conversation. We'll see you soon. What's going on everybody? My name's Chaz. I'm your host here with the D SPAC podcast. I've got long, long with me. Long is legendary. If you don't know him, this guy is uh, he's put together some of the best. D SPAC deals in the ecosystem. I'm honored to have him as a client with Churchwell Insurance Agency, but even more than that, I'm honored to know him as a person.

He's a great guy. I think that you are going to be inspired by a lot of what he has to share today and you'll definitely be educated by it. Long appreciate having you on. 

Long Long: Well, thank you very much, Chaz. Really appreciate the invite and I'm glad to be glad to be on the podcast. I 

Chaz Churchwell: appreciate you, brother. So, okay.

I've got a list of questions that I'm gonna want to run through. Little by little we'll have some organic conversation in the midst of it. But, uh, you've been in capital markets in the SPAC industry for quite some time. I mean, you kinda look like a fountain of youth. Your age doesn't, uh, doesn't portray quite as well, um, for, for what your experience actually is, but I wanted to ask.

And, uh, in, in capital markets, there's, there's things to where, call it tragedy, call it an epiphany. There's something that has probably happened that's been significant along the road that's really shaped the ethos of how you operate and how you do the good SPAC deals that you do. Um, could you share kind of like what that experience was, what triggered that and, and shaped you into who you are now?

Long Long: Yeah, absolutely. Um, I think the key, one of the key, you know, my background before SPACs, right? The capital markets. I got into SPACs about eight, nine years ago, around 20 17, 20 18, even before the, you know, the first SPAC boom wave. Right? But before then, I actually, my career was actually in corporate finance with IBM for about 10 years, right.

That was a very, you know, IBM being a very, you know, large established corporation, has a very str, had a very solid structure and a way of doing business, but also reasons for a lot of the rules and everything that goes around it. Right? So, so, you know, yes. Is it slow? Yes. But it definitely, you could see the reasons of why some of you know, the processes, some of the, you know, structures are in place.

Right. And I learned from it and, you know, that's probably the best place to learn from it. That's kind of the foundation that I, I started with. So that's a little bit different probably from most investment bankers, right? They usually, you know, jump outta college directly into the investment banking world now.

So, but um, you know, but with regards to SPACs, so the first SPAC I was involved in back in 20 17, 20 18. Was, I wasn't a actual management team member, you know, official, you know, director, officer of the spac. Right. But I was the one who worked on all of the, you know, the financial statements. The one who's helping to file the 10 Q 10 Ks, and, you know, and as I, you know, worked through it, I became more involved on, in terms of the, you know, review process, the targets and everything.

So, um, and in there, you know, one thing I've noticed. From that SPAC experience and otherwise was that, um, that's really kind. Shape. How I approach SPACs is I saw some things that I, I believe could be improved. So one thing I noted was that the, you know, the SPAC sponsor teams now, and for, you'll see a lot of the SPAC management teams, sponsor teams are very, you know, they are C-level executives, or they're senior partners at, you know, certain big well-known investment firms.

They're well-known people, right? And they have a, you know, great reputation. However, what I've noticed is that you know, when you, a SPAC is not just a deal, right? It's you're actually running a public company. So what happens is if you, you have like four or five of these people together and they're all, you know, each of them are very used to them being the, you know, leaders and kind of assigning orders and telling you find that you actually lack a.

For lack of a better word, like a project manager or a coordinator for the spac. And what happens is, you know, every, you know, then, you know, sometimes it could go a month or a month and a half where nobody, you know, we don't, there's no internal meetings or sometimes where people are just working on their, on their own and people aren't necessarily communicating because, you know, nobody's there to organize it because, you know, that's kind of viewed as more of like a, I guess a mundane, it's, it's not something, it's a maybe secretarial work.

Almost, I would put it that way. Right. But, uh, however, you know, but, you know, but that's, but what I found is that that is, you know, that actually, you know, that lack of communications or someone who's not stepping up to help organize these things that actually, you know, delays everything and people aren't aware of where everything's going on.

So. Um, so that's one big takeaway. Is it, that's just the target search. Right. But even more so once you find a target, you know, someone have to coordinate. 'cause you have to have the board meetings to prove, you have to have the legal counsels to review. Like, unless you have someone stepping up to actually do all that.

You know, then everybody's kind of just looking at each other. It's like, what's going on? Can someone a brief and, and the, and you know, and you know, our, you know, partners like in, with our legal council and counting, they're great. They do their job. But if you were expecting them to be the one to coordinate, set up all these meetings, you know.

They don't really have that capacity because that's not what their forte is. And imagine them trying to set up meetings with four or five high powered, you know, people like, which this state, this state, this state. It's just, you know, that communication just doesn't work unless it's coming from someone internal that the people know and that they are willing to listen to.

And who has, uh, the kind of communication skills able to kind of get those coordination actually done. Right. So. 

Chris: Love that. So 

Long Long: that, so that's one big thing. So that's what I, no egos No egos. Yeah, exactly. Exactly. You have to have someone there to do this. And, and, uh, you know, that's one the, that was the, um, one of the biggest takeaway, right, that I've really applied to all my current SPACs.

So all the current SPACs, you know, I work with wonderful people who it's great because, you know. We've been through, you know, our, the ES team, we've been through SPACs together. They, you know, trust me in terms of how, you know how to manage the process, right? So I'm more easily able to do that. So for example, right now, starting day one, immediately after IPO, we have weekly cadence meetings with the internal team to discuss every single target.

Who owns them? Who's talking to who, where, who, who needs an NDA where the lois at? You know, so at weekly Cadences where everybody's on, on the same page, right? So, EV there's no surprises on where we're at for everyone at the, you know, and it doesn't even take that long. It's just about 30 minutes to an hour each week.

But you need someone. To set that up and you need someone to coordinate that and then you know, and you know, typically, and you know in one right, in the merger process, what I do similarly is, you know, with the current company we establish, you know, once we get into the LOI or very serious discussion phases, we establish a twice a week meetings once on Tuesday mornings, once on Thursday mornings.

This way. The entire working group of the two teams. That's between, you know, the SPAC and the target and both our legal counsels accounting and audit. Right? It's 30 minutes to an hour. You know, we don't waste time. We just get directly to the bones and say, okay, what do we need to do? A, B, C, D, who has to do it?

And what's the due date and what does the timeline look like now? And you know, again, you know, I take the, you know, what I do is, you know, I send out agenda. Before each meeting, and I sent out meeting minutes after each meeting, so you know, I And 

Chaz Churchwell: you're the CEO? 

Long Long: Yes. Yes. I am like, no egos. I love that man.

And, and, and, and I would say because I'm the CEO and because I am the most probably aware of all the different work process, I, I, I, I'm actually, you know, I can, you know, I, I can. Include the right details, those meme as things that nuances, which may have not been discussed, but which I'm aware of, which I can include.

So, and you know, it's, it, it's, it, it takes time certainly. Right? But, and I think part, you know, that's a, but it's something that is need, that I feel needs to be done and I feel is a very big contributor to the success of our d specs is because of that hands-on and our hands-on, the hands-on process that we've had with it.

Chaz Churchwell: Okay, so just as kind of a, a recap and kind of putting it in, in light for you, if you're a target company, if you are a private company looking at possibly going public through a spac, you wanna make sure that you've got a team that's not just a bunch of peacocks on the SPAC team. You wanna make sure that it's not just all of these high powered executives or celebrities that are coming in on a deal who bring star power to it.

But people who are stepping in with no egos, that are being dialed in, working hard with a process, they're focused with you on getting a deal done. You want to be public. You want to make sure that the people who have the opportunity to get you there. Are dialed in so that you are getting a clean deal done.

So first of all, thank you Long for breaking that down. I wanna move forward and talk about something else that I had for you. Whenever you're looking back at SPACs that you've helped build and run, what core principle do you think separated your good deals? From your bad deals, and don't just think about this from, from the, uh, the side of you as a target.

Like what do you, I'd love to hear, or pardon me from you as a spac. I'd also love to hear, like for those of our clients that are, or our listeners that are on here right now, what do you think makes a good deal for them on the other side? So I, I'd love if you could really kind of hit both of those and then obviously Trump the art of the deal.

He'll tell you that. It has to hurt for both sides, you know, like, uh, just a little bit and that's when you know you got the good deal, right? So, uh, whatever. But I'd love to hear from you and, and try to, if you could keep it kind of maybe like two minutes on each side of that, um, on what you think makes for a great deal.

Long Long: Okay, sure. So I think, uh, I actually think it's, uh, so on the target side, you know, what is an ideal target for a spac, right? It will make a great deal. You know, the target should, the target company should be clear about their intention, the reason, and the motivation to go public via spac, right? Mm-hmm. So they need to have, you know, for a spac, you know, the.

Toughest one, the toughest targets or the ones, it could be a very attractive company, right? But they're, if they're waffling between, do I want to do this? Do I want to do IPO, et cetera? You know, regardless of how quality is, there's always that, you know, question mark that risk. And that is, you know, something that, you know, no SPAC wants to spend a lot of time on and only for everything to kind of fall apart, right?

So, and not to mention, I think the key is for target, the motivation to ch. Be all in and say, this is the way we wanna do it, is also internally, they don't divest, you know, their resources aren't separating different groups and they can focus on actually getting one thing done. Right. And that I think is very important.

And there, and also the board, the management team, there's no. Internal disputes about should we go traditional IPO route? Should we do a spac, should we do with this, should we do with that? So, um, so that all that, you know, that's, I think one, 

Chaz Churchwell: let me, let me ask on that real quick 'cause Sure. Sometimes you don't know until you at least get in and have the conversation, right?

Sure. So like, at, at what point do, does there really need to be a definitive, this is the path that we want to take forward before, like, 'cause I mean, at first you're kind of dating, like when do you say, let's make this happen, let's get in a relationship. 

Long Long: Well, I'm not, uh, my reference to, you know, being committed to the SPAC deal is not like, but a legal thing.

Right. Legally, you know, uh, you know, target's only committed to SPAC deal when the business combination agreement is signed, right? That's legal, right? I'm referring and absolutely, I can fully understand targets, especially if they, because you don't, uh, company doesn't do, uh. Dpac more than once, right? Or a traditional IPO.

It's a one and done. They have to make sure it's the right choice. It's done. So I absolutely agree there has to be cautiousness around it. Um, so that's why, you know, it's that dating period that you mentioned, like that first month or two or so, you know, between even before LOI sign or, you know, after LO sign, where're exploring here.

Right? But I think the key here is. Be clear what the objective of the exploration is, right? And, and what is the threshold for the company to be, make the choice to go forward with the SPAC full throttle, right? For example, you know, if cash raised is a big, you know, big thing and that's the biggest kind of motivator for the company, then potentially it's, you know, try to go talk to, you know, three to four test the water investors, institutional investors to give the sense of how well the com.

You know, the deal could be received and also what's the likelihood of raising a pipe, right. Even before PCA announcement. So, um, so those are, so that's an example of something that can be done, you know, to get the company to the point where they make that decision. That's during, during, during, during, like you said, the dating period.

And, but the key is be clear on. Is what needs to be done to get to that point for the company to make up, make the decision, and then, you know, focus on getting those things done. 'cause it can be, if it's not clear, then you're never gonna know where you're trying, you know, we're trying, at what point does the dating stop and you actually getting, start getting, getting serious?

Chaz Churchwell: I like it. I like that. Okay. So from the SPAC side, what looks sexy to you? Like what is it you say, this is for us, this is gonna make for a good deal because, and I, I think it's important for the targets to listen to this because the, the more attractive you find the target. It, the better that they're going to value to you, number one.

And number two is you may have 3, 4, 5 targets. Like they're not the only person that's there that you're talking to, so they shouldn't assume just because they're giving you their attention that they're all of the sudden apprised to be one. Right. 

Long Long: Yeah, absolutely. So that's absolutely the case, right? And so the tar, and maybe just adding on a little bit more to that, right?

If I were the target, and I want to make myself attracted to SPACs, right? It's about not just about motivation, but it's also about readiness, right? For example, you need to do your research upfront about what it takes to like there are. Skating items that are U universal for every single SPAC deal that, you know, you, that's actually, it's very, you just, you can just do a chat GP two search and you should, you can already find, it's not hard to determine.

There's a lot of literature now out there about the SPAC process. Right. But just to give you an example, you know that if you're gonna do a. DPAC in merger in the us right? And you, if you are a US domestic company or maybe even a international, you, you need P-C-A-O-B audits, right? Yeah. So therefore, most private companies don't have P-C-A-O-B audits.

So typically they need to do an uplift. Right? And you know, I. Almost never seen this before. I've only seen this very rarely, but you know, if a target is saying our, our audits, it's already PCOB, it's already done. Right? So like that is just, you know, that would be wild in terms of how ready they are. But I almost, almost never seen something.

It's always, you get into conversation with the company and then you know, you, you teach them. It's like, well, this is what you need. And then they're like, oh yeah, then. Okay. It's another two months. Okay. Fair. But that's two months on the timeline about, you know, about you need to get done before the, you know, before you can move, move forward with the deal.

So, and that's at least two months, 

Chaz Churchwell: right? Like sometimes they take longer than that if they end up being somebody that's dragging their feet. If, uh, if there's internal grumbling about doing audits, because audits aren't fun. Nobody likes to do audits except for the audit team. 

Long Long: Right. And if you haven't, and if you haven't done at that level, it, it's not likely.

But there is obviously the chance of something going wrong, right? So, you know, something that you didn't expect to pop up and then all of a sudden you would much rather know it before you started the process than it's like, than during the process like. Oh, this is gonna take us another two months to address or something to, you know, so then you, so, uh, again, so that, so that is something obviously the readiness of the company and how much thought they put into, you know, potentially de sacking is definitely another reason.

Chaz Churchwell: And I would even say, particularly if you're a private company that's family owned and, and maybe a founder company. You're used to doing everything a certain way, um, because you can just get away with a lot more that, candidly speaking, the financials have to look exponentially different whenever you're going into being audit ready.

And a lot of times. People are used to just doing things and running their business the way they want to do it. It's the way they've always done it. And, and so you end up getting pushback on that and, uh, and there ends up becoming that friction and tension that's there. Um, I'm, I'm guessing you, maybe you've seen that, I don't know if you've come across any of those companies that are just founder led, family owned, to where there is a tension that's there and they need to, they need to have that come to Jesus moment.

To where they realize, okay, I want to be public. It's time to shift the mindset. 

Long Long: We have certainly, you know, we have certainly, you know, talked with and then you've got a big grin 

Chaz Churchwell: on your face talking as you're saying it. Certainly, 

Long Long: certainly that is a num, but I, but you know, one thing I will say, right, these are the type of targets or, so, you know, there are, I'm sure there are exceptions, right?

But, you know, um, none, none of the finalists or the targets that we've, you know, really engaged very seriously with our, you know. Are in the, you know, kind of range. Like they're, you know, very, you know, they're not very clear about the requirements and also they're, there's a lot of pushback about, is this really needed?

Or, you know, so where the mindset is still not a public company mindset. Right. And that's, that's a key. 

Chaz Churchwell: So you're not even gonna take 'em serious if they're coming to you with that mindset. So they need to already. Come to terms with that before there's even a conversation with the SPAC team in your mind.

Long Long: Sure. Because don't forget, you know, the spac, you know, you, you, you, I mean, there are many benefits that Spac d SPAC brings, right? Like, you will have liquidity, you will potentially have a large capital injection. Like they look at all the positives, right? But don't forget. At the end of the day, what you're doing is you are effectively IPO in your company, you're, you're becoming a public company and you are at the same time reaping all the benefits.

You have to adhere to all the rules and be aware of the much, you know, much higher risk exposure, as I'm sure cha you can, you can talk, certainly talk more about, right, and they have to be, have the mindset that, you know, you are no longer a. Startup, you're no longer a private company. You have now far more obligations and to far more number of people and you know stakeholders than what you're used to.

Chaz Churchwell: And we're gonna get into that in just one minute. Um, but before we do, I've got one other question I want to hit you with. I want to talk about the fact because I, I feel that. A big part of what we're talking about right now is the idea that private companies oftentimes misunderstand the real work required to prepare for the D spac and I, I would love.

Again, two minutes. Could you pop the hood and tell our listeners what is it that they should be expecting at a high view? Like what is your team needing to get dialed in for if you are gonna walk through the D SPAC process? 

Long Long: Sure. So a few key ones, I would say at a very high level, right? One we've already talked about is your accounting audit financials, right?

That is, you know, definitely absolute key. And you know, if there's any. Potential issues with that, that should be uncovered very upfront, very quickly and determine if this is gonna be a gating factor and if so, is it a, you know, is it one that's just can't be resolved or how long it takes to resolve it?

Right? That's number one. Number two I would say is, you know, board alignment or a shareholder alignment on the target side because you know what happens is, you know, either way you don't want to get is, you know, you want to make sure the target, whoever's speaking with you. Their board or their shareholders where they have a maturity agreement that if this works out a certain way, they're gonna proceed.

Right. You, the worst thing is, you know, you talk with the CEO, et cetera, but then, you know, at the, you know, when you are about to take a vote, and I mean spac, you know, vote is, you know, very, you know, very standard. But if you know there's some. Issues coming from the existing shareholders who disagree or who's trying to take, you know, take the opportunity to get some additional, say, well, you know, I'm a 1% shareholder, but I hold the, if I don't vote for this, this doesn't go, so give me more economic.

So you want, you know, you want to make sure that the, uh, the target, the management who you're speaking with already have that kind of like. Authority that's granted to them to be able to make that decision right. And they're confident that if the SPAC deal goes through that, that will not be a gating factor or issue on their side.

So that's second. And, uh, third is probably more on, I would say, cash. That's something maybe, you know, that's vaccinated. Uh, so, so, you know, private companies, some are, you know, have more cash than others. Right. But Spac d spac. It takes time, right? It takes typically from LOI to D spac, uh, you know, on a good day, maybe five to six months or so, depending on the, you know, how long it takes to negotiate.

So you have to, you want to make sure that the company has the, um, runway, you know, to, you know, to D SPAC and have the cash available to, you know, go, go get to the D SPAC and be able to, you know, get that capital injection work board right. And, and you know, that takes some, you know, asking questions there.

So, um, I would say off the top of my head, those probably the. Three things I would say, you know, you should, uh, you know, a SPAC should be, or for Target, you should be, you know, those are things that you should probably get ready to, to discuss. I like that. 

Chaz Churchwell: No, I appreciate that. That's gold right there. Okay.

So from your perspective, what does true public readiness look like for a private company? Preparing for a D spac, and don't wanna give a caveat there. Um, if you're, if you're a listener right now, public readiness failure for you going through a d spac. To be public ready. It will be the number one downfall that triggers securities.

Litigation. Failure to be public ready is the number one reason that go forward. Companies out of a d SPAC find themselves in court being sued by their shareholders. So again, just kind of recapping that to you from your perspective. What does true public readiness look like for a private company rolling into a DS spec?

Long Long: I mean, I think, um, I would probably break it up into two fronts, right? One I would say is more from the financial accounting. That's probably the bigger one. And the second is really in terms of communication to public shareholders, right? So, uh, financial and accounting. That is kind, you know, that speaks for itself, right?

Because you know, as a private company you have, you know, you are not held to the same level of scrutiny, right? And also, you know, risk as you are as a public company. So you want to make sure you have a very, you know, detailed, warranted. You know, and, you know, so a CFO in place, and maybe even think about bringing in a controller, right?

Because now as a public company, now you have to worry about internal controls more, right? And this is not just about, you know, it's uh, you know, expense reimbursement, others, but you know, we're talking everything from accounting otherwise, so. It's a, it's additional expense. A private company probably generally don't typically, you know, include in their budget usually, but as a public company, it is a fee that you pay in order to be a public company.

So you definitely need to, uh, either have built out or have an idea or have something already planned for a more, uh, for a bigger, you know, bigger finance and control function for the company, you know, and that's. Really a big part of what public readiness is, right? And then second is the communication.

So as a private company, probably most, our most, you know, founders or CEOs, CFOs are used to talking, you know, to the board in like a private setting, right? But as a public company, you have your 10, your have your quarterly earnings. You have your, your ends, which you have to publicly, publicly communicate, and oftentimes, you know, on like a live or a podcast with, you know, with on, you know, with, uh, you know, with, uh, research analysts.

So, and also, so you have to be, you know, much more careful as I'm sure you can say, you know, as a public company, what you can, yeah. Or can't say during those. And also just in general, right? No longer as if you're not Elon Musk, right? You can't get away with, you know, on Twitter start, start saying, oh look, you know, hey, you know, we're gonna be doing this deal, so, et cetera.

So that is what gives, you know, lawyers and assure yourselves, you know, hard habitations are things that you see there. So, so I think, um, so if the management team are more used to more relaxed, informal communication, mess, mess methods or so. They need to really, you know, dial back or at least be much more cognizant and deliberate in their communications afterwards.

Chaz Churchwell: So, yes, a hundred percent. And so two things I would say to that. Number one, um, for private companies that are watching this, you need to lean into the tool belt of the SPAC team that you're working with. They most likely have a strong ecosystem around them of investment bankers, investor relation people, um, audit, pre-audit.

Accounting and attorneys and an entire bullpen of people that they can refer you to and connect you with, who would love the opportunity to help you navigate through the process of becoming public ready, because you can't just walk into it and think that you've got it all figured out like we talked about earlier.

No egos. Come to it with a humble and teachable spirit because the game completely changes. So, I mean, for example, you're the CEO of Archimedes Tech, SPAC partners too, and you'll have a deal going out probably soon to where you'll announce something. Maybe, um, you've been at it for a while. I know you're talking to, to companies right now.

Whenever that happens. For example, one thing that a lot of companies don't realize, if you're private d and o insurance, it's directors and officers insurance, that literally protects the directors and officers of the company. You should have a private policy in place before a filing ever even gets announced, and that way, whenever those filings are there going on record with the SEC, if there's ever anything from those filings that get brought up in court.

That you've already got yourself a level of what's called a pending and prior date that goes back to the cover you whenever that filing came out. Like those are different little things that a SPAC team can step alongside kind of coach you on. They could connect you with people like a d and o insurance specialist.

Who can coach you on those things to make sure that you've got proper protections and protocols in place. And then by the way, I, I know that you've probably got, uh, another couple of SPAC deals that are coming out shortly down the line here, another two and three. So, um, we'll make sure that we put in the comments section for anybody that wants to connect with long about any deals that he has coming out down the pipe.

'cause I'd love for us to be able to be a blessing to you in that way. Um, but as, as we step forward, I've got another one that I want to hit you on. What do you think are the biggest operational or financial weaknesses that you see that end up showing up whenever you're working through a deal with a company that's looking to go public through one of your SPAC vehicles?

Long Long: Um, actually, I'm sorry, could you repeat that, Chaz? I, I think quite what, 

Chaz Churchwell: like what are the, what are the biggest operational or financial weaknesses that you tend to see whenever you're looking at targets that are looking to go public through one of your SPACs? 

Long Long: Uh, yes. So the financed operational. So I think it's really target dependent.

Like I said, you know, some targets are, have exceptional, um, you know, finance, you know, talent in place. And those are the ones, you know, we don't have to, we are, you know, we're, we're grateful for and right. But there are others, uh, the others, you know, where I think, uh, in other cases, like for example, our communities won, right?

Phenomenal management team and great CFO, but at that time, but the CFO did not have, I believe. Any, you know, really public company experience and they were more, you know, just they. Did well. So, but you know, so one of the biggest is probably in those cases, right? You do want to bring someone in, um, you know, for, you know, to help with the finance and operations.

But, um, that's mostly, and also second was probably from a company, you know, from a internal controls perspective, right? And that is really, I think most, uh, private companies, they. You know, they never had to formally, you know, go through like if, if you are a public company and you have an auditor, you know, with you, you know, like if for public they, they will grind you on terms of internal controls, A, B, C, D.

Like, you have to have this, that, things that just not, are not as scrutinized with a private, private company. Right. So, um, internal controls, I'm sure I, I. I'm sure is going to be probably one of the bigger changes and to have a formal, documented internal controls and to be here to, so I think, you know, that's probably one a big, uh, you know, big one between, you know, uh, internal between private and public company.

Chaz Churchwell: Got it. Um, let me ask you, have you, have you ever found yourself getting into a deal and then all of a sudden the financials ended up not looking as you thought that they would, or you saw the, the operations did not come out as described. And just something to where it really just soured you guys on the deal and you ended up walking away because they painted themselves as one thing and then you ended up seeing something else.

Long Long: Yeah, I mean that certainly there are a few cases of those, right? And I think, you know, in the past, you know, we, you know, looked at, you know, typ typically like four, at least 40, 50 targets per SPAC that we, you know, that we have, right? And so, you know, of, you know, you, you, you only hear about the success, right?

Because that's the one that we find the great, but you know, all the other ones are buried in our, you know, disclosure, right? We looked at 40 targets, 50 targets. We ultimately da da. So. In the very, within those 40 or 50, are definitely companies that, which looked or sounded great upfront when it was brought to us, but then obviously in our, you know, due diligence, initial due diligence.

Otherwise, as we kind of dove deeper into either, you know, the technology claims or the, you know, the finances or looking at their financial statements, right. And, you know, he knows, oh wait, maybe hey, oh wait, there's a, you have a. You know, $85 million loan here, right? Or something, et cetera. So something that's not, you know.

Maybe stay upfront that, but that does have a impact in terms of, you know, your, you know, view of the, you know, the company, the, you know, their, you know, runway as well as, you know, as well as what, as well as, uh, you know, the claims for revenue or otherwise, you know, going forward. So absolutely that's, and that's what we've done during the, that's what the dispatch should be due diligence for, you know, in the initial weeks, you know, after engaging with the target to really to figure out if this, if there's any major, you know, gating items.

Chaz Churchwell: So lemme ask you this, man, you and I, we met, I guess probably a year and a half ago at the SPAC conference, I think it was. Mm-hmm. And I've, like, I've gotten to know you a good bit over, uh, over the past year and a half of time, and everybody that I've ever encountered, who knows you. Man, they, they're just blessed by getting to have met you because you're always, your disposition is always so gracious and kind and humble.

I'm really curious, like, I know you said you got into SPACs mm-hmm. In 2017, like, what is it that allows you to be so joyous and like, and passionate about doing SPACs and like. I, I'm just, obviously there's money that's there and there's something kind of cool that kind of strokes the vibrato, you know, of, of taking companies public, but there's gotta be something deeper to that.

Like I, I'd really just love to hear your why. 

Long Long: So I think, you know, for me, you know, I, I, I start, I worked in corporate finance, started off right, but, you know, I'm actually, when I graduated from Washington University, St. Louis, uh, I actually, I had a degree in finance, but also I had a degree in electrical engineering, right?

So I'm kind of like, not just purified, it's more still like a, like engineering. I like. Putting things together. I like things to be orderly and I just, in general, I like to create things where bring value. Right. In general. Just, it just, just the, that process by itself really brings me a lot of joy and comfort and satisfaction.

So it's that process and for spac. Right. I know, I, I may be somewhat, you know. More on the maybe naive side in terms of how I approach it. Right. But you know, I truly, you know, you know, and I'm sure the vast majority of the SPAC mergers or deals are done in with the kind of traditional, you know, m and a mindset, right?

Where private equity mindset of maximizing value, you know, you know, you know, two sides going and trying to. Figure out what's the, you know, how to maximize their own value and try to, it, it is, people probably view it as like, you know, ASO of suits, right? Where you got, you know, high power guys going at it, trying to get the best of the deal.

But I mean, to me, uh, the SPAC really, you know, is, you know, for us, for, to me it's a vehicle, it's a service we provide and it's a necessary one. 'cause you have your traditional IPO path. But as we've seen a d spac. Is AB is, could absolutely be the right choice for certain type of targets who want more control over the, you know, the, uh, IPO process.

Who wants more time and who wants more, you know, exposure right before, before D Spec. So, 

Chris: yeah. 

Long Long: Uh, the way I'm taking, it's because I, you know. You know, the, you know, we can talk about this, you know, later, I'm sure it may be one of your questions, right? But the we, the way, you know, um, I, and you know, my team, you know, we structure our SPACs, it's very transparent.

We do the best we can to make it a efficient vehicle. And we do everything with the target in mind, right? How to minimize the friction, how to make sure that there's these possible things going wrong. And it, you know, and. On and on the other side, you know, we are really looking for targets or partners who treat this as a collaborative effort.

Right. You know, there's no shortage of targets out there who just sees a SPAC as you know. Oh. So, you know, so, you know, just delete, just, you know, just a vehicle. You know, we have five different SPACs lined up, you know, whoever gives us the best valuation, whoever gives is the best, you know, terms, et cetera.

So, you know, so we tend to try to avoid those type, type of targets because at the end of the day, they don't. Really, they don't value. You know what I, I believe you know, my, and you know, our team brings forward and they probably, you know, won't be, le won't be able to leverage what we can offer as well, right?

Because they're having their mindset of how this works. But, but however, there are absolutely companies targets out there that do value what we bring, right? And these are the ones that, you know, when we talk with them for a long time, longer time, and when we really establish rapport, they understand and then, you know, they trust us, right?

And we trust them and we move forward in collaborative manner. And, you know, in. It's like you said, money's there. Right. But, you know, I personally am, you know, I'm not all that jazzed about, you know, yachts or et cetera, et cetera. You know, it's, it's my, I, you know, my interests are, you know, relatively limited in terms of it, and I, but it's the work, you know, I really enjoy being able to bring a, you know, very passionate management team who's worked, you know.

Years on company who's gone through ups and downs and yet brought the company through to, you know, a gr, a great turning point and being able to help them go that next mile and just go public and, you know, really help them, you know, expand and, you know, really realize their vision. 

Chaz Churchwell: Okay. I'm gonna ask a, a appreciate that.

Then I'm gonna switch, I'm gonna ask you kind of a crazy question on a personal side. I'm curious, like everybody kind of has a bucket list of things that they want to do. Right. Mm-hmm. What is, what is one bucket list item that you want to do that kind of scares you or intimidates you? Ooh.

Long Long: Oh, actually there might be one. Uh, I getting married at one point. Okay. It'll be honest. So right now I, let's say right now, I think, you know. You can probably tell I'm pretty passionate about my career and work and, and everything else, right. So it's thus far. That's kind of the main focus despite parents, you know, says asking as, you know, typical Asian parents and everything else.

Right. But, but, you know, but it, it is, it's, you know, this is kind of my comfort level, right? My comfort zone is focused on work, focus on this. Yeah. That's, you know, really. But, um, but you know, really, you know, to branch out and to, you know. To, you know, find the significant other and to really, you know, to take that.

So that's, that, that, I'll be honest, that scares me a little. That scares me a little. And, uh, but, you know, and, and it's, uh, some, some terms like it's a bigger commitment right. Than I've 

probably ever been in. So, uh, so you know, honestly, that that would probably, that's probably that. But I absolutely do want to achieve that.

So that, so I would say that's actually probably, that's probably right. That's a answer to that question, I think. Yeah. 

Chaz Churchwell: I love that answer. That's awesome. And you know what? Marriage can be scary and it can be intimidating. And it doesn't just end when you say I do, because every day you love this person and you're, but it's, uh, it.

There, there's a lot of, anytime you open yourself to love, it's always scary, you know? So I get that and I respect you being that vulnerable on here with that. So any ladies that are watching the show, he's successful. He's, uh, got an amazing personality and just, uh, and remember his contact info's in the comments, and I'm just 

Long Long: hopeful 

Chaz Churchwell: out the corporate contact info.

Now let me, let me do this. I want to, I asked you that question on purpose because. It could be scary for A-C-E-O-A board, um, the, the directors and officers of a private company to go public. They're doing it. They're making that step. You know, this is a bucket list thing. They've had a vision to go public.

What are some of the things that they just need to lean into and be like, yeah, this is, this is scary, but like, but you've got this. If you do X, Y, Z. 

Long Long: Uh, so, uh, I would say for, you know, probably if they're ready to go by, it's having probably a clear vision, right? About number one, why do you wanna be public?

And number two, what are you planning to use the proceeds? Like, these are the questions that investment, that investment investors will be asking anyways. Right? But it's clear. It's like it's, they like, you know, they like to see and the company should have a clear vision about, yeah. The benefit 'cause being public is, again, you know, it's, there are benefits, but there's a downsides to, there's things from risk exposure to, you know, to pub to public filing requirements, everything else.

So there's up and down. So you have to be really, truly honest and, you know, assessment on why you wanna be public. You know, and is, and, and uh, also, you know, if, you know, for being public, if a big part of it is capital raising, what exactly are you going to be using that on to expand your footprint, expand your business, and, you know, and are you at point where you can really leverage that?

Right? So, um, the, I would say that's probably the key parts. 

Chaz Churchwell: That's huge. I appreciate that. Okay, now let me ask this. Okay. Kind of staying in that same vein of things that you should be nervous about or concerned about. Um, any leadership team for a private company that is looking to do a deal with a spac, what are the things that you think that, in your experience, 'cause I know you talk about wanting to do clean good, like low friction ethical deals.

What are some of the things that people should be. Acutely aware of before they sign anything that they should be looking for to make sure that they don't get pigeonholed into a like a bad deal. 

Long Long: Sure. So, and if I was a, you know, a private company and I'm looking at assessing SPACs, right? You know, off the top of my head, there's probably three key things, right?

And number one is, what is the structure of that spac? Right? And I'm talking the key things are, one, the promote percentage, and number two is it, is there any, you know, uh, you know, if there's any, you know, the. Promote percentage rights slash warrant structure. And number three, you know, within there is also any, you know, you know, non-standard terms.

Right? So like a warrant terms. So, so, uh, I mean I can cover the, each of those. You need a little more detail if you want, if you prefer, if you want. So, uh, just really quickly, right? So. You know, for the longest time the standard promote for a SPAC has been 20% right? And the standard, kind of like the structure has been, you know, a half a warrant, quarter warrant, a third warrant, where, you know, in cases of high profile SPACs, maybe no warrant.

So, uh, where the warrants are effectively five year call options at 1150. Strike price, right? But last year, last year or two, you certainly see a lot more of these promotes where the promotes are of over 20%. And when I say 20%, it's So just explain to promote in case any anyone isn't Yeah, please 

Chaz Churchwell: be. Do 

Long Long: it.

So the promote is, you know, when a SPAC team puts in, you know, millions of dollars to create a spac, right? This is the, and puts in the time and effort they need to get something in return, right? And what they get in return, typically, you know, it's not. Cash directly. It's equity in the SPAC IPO, right?

Purchased a very low price, and that basically says you are only going to be compensated if you are. You find a good target and you know the, you get a D spac done. So typically that's point percent, meaning if you're. Uh, if you are a a hundred million dollars spac, IPO, typically that means the, you have a $20 million worth or 2 million of, you know, founder shares, so to speak, quote unquote founder shares or so.

Um, so, and, and that is, uh, or 25, so 20 or 25. So in that case. That's the promote. So typically that's been 20% of the total, um, total outstanding shares right after IPO. But now, you know, there's been cases where it's 25 30 or I guess even higher. Apparently 

Chaz Churchwell: I've, I've seen 'em go higher. It's crazy. Yeah. 

Long Long: And, and, you know, and you know, part of the, you know, part of this is.

Part of this is, you know, some targets just may not care, right? They care more about, you know, I just wanna go public and I want to find team, and if I, we can raise some money. Like, they don't focus on, but if, if, if you are a, if you built your company over the past 10, 20 years, right? And you know, you have, you know, put sweat and tears into this, you wanna make sure that, you know.

It's, you have a good deal structure there, right? Which is, you know, and 20%, in my opinion, that is, that's currently one of the, that's probably, that's the standard that's lowest. And if they're, if there's more than 20%, then you have to be pretty darn sure that they're bringing additional value to justify that.

Right. That that's not right. And 

Chaz Churchwell: it, and it can be justified in certain situations. Absolutely. But yeah, to your point, 

Long Long: yeah. Then, you know, and then we're talking about warrants and rights, and that's maybe a matter of personal opinion experience. So, uh, so rights as rights. There's quite a number of, you know, SPAC deals that has deals with rights nowadays.

Right. And the difference between rights and warrants. Again, you know, warrants are typically $11, again, option, right? It's basically a hold warrant gives the, you know, holder. A, you know, a option to buy the share at $11 50 strike price for up to five years after the, you know, merger closed. Whereas a right, you know, is basically.

If one fold, right? It gives the, you know, holder the right to convert that to one share. That's it. To add the merger close, just they get one share free and clear. Nothing else, right? Like, that's it. So, so tho so, um, you know, so, and all these are wrapped up in the units for the SPAC IPO, right? So typically when SPAC IPOs, this is the, you know, sweetener on top to kind of get the, you know, the SPAC IPO investors invested in the IPO.

So that, you know, they're getting their, you know, interest, right, for this trust. But they can, something on top of that, that that's what, you know, gives them the incentive to invest in SPAC IPO. Right? So, um, you know, for me, my first, you know, encounter with rights was back in 20 17, 20 18. That first deal, you know, uh, that first SPAC I was involved in and, you know, my experience has been.

With rights has been pretty, you know, negative. And that's why, um, you know, for, just give an example, right? For our committees to our current spac, when we, IPO, the marking con condition was such that, you know, we, they said, look, if you include a 10th of a right, we, we had a, you know, half a warrant, right?

But they said if you come, if you change your half a warrant to a 10th of a right. Um, you know, then. The, the IP SPAC IP investors, they're good with that. But if you insist on keeping your half a warrant instead of having a right, then you'll have to overfund your trust by, you know, half a point, which is like one between one $2 million.

We chose to put in additional one to $2 million of our own money rather than go with the right structure. And that's really, again, and here's the problem, in my opinion, of what rights are. Warrants, you know, they, they have value. Yes. Right? But they, those it's essentially it's after the merger and only if the company performs well and it gives the company the opportunity to get cash.

Right. Because if they're exercising warrant, yes they're getting, getting share for a good value, but they still have to give them dollars and 50 cents to the company to exercise that. So there's that, that a right. For example, if you're IPO with a 10th of a right. That means, you know, it's effectively all the spac IPO investors, they're buying your shares at $9.

They're already Right. And they have there. So, um, so they, they have just one right. You know, one share free and clear, you know, for, you know, one full. Right. Right. And the problem is when you're going to go raise a pipe at the end, right. Where you're trying to raise additional capital, et cetera, the pipe investors or other, if it's a.

You know, a deal like 21 where it's shared is like the, the Bitcoin treasury goes $30, nobody's gonna care, right? But for the vast majority of the companies where these kind of negotiations are hard fought and goes, it has, you know, really nuances. They're gonna look at the pipe investor gonna say, wait, so you want us to invest in your company at $10 per share?

And yet all the public investors right now, they effectively bought it in at $9. So, so, you know, so, and then it becomes a race, right? They're saying, well, give us the same deal, $9 or even less. So it, it basically, it, it creates a downward pressure on the perceived value of the shares and the market and where your, you know, what you are, you know, marketing and that.

Can cause a lot of problems and a lot of friction down the road. And we, I've seen that firsthand and I don't want to pursue that. And that's why we did what we did for our communities. 

Chaz Churchwell: So let me, let me ask about that because, because, and if you're listening right now, you've got either one of these are dilutive tools.

Candidly speaking, they, they're both dilutive tools. The right is instant dilution, um, but the warrant is delayed dilution based on performance where you do get cash. If it transacts, making sure though that it's not a cashless warrant. If it's a cashless warrant, then you get zero cash extra, which that's a bad deal.

Long Long: Right, and to to, to address that. Typically, the warrant allows, so cashless versus cash, that typically is at the management's discretion, right? So it's not the shareholder. So typically that helps. So the management can choose a, do we need the cash or do we just want lesser dilution? Typically, that's it.

That's how it's arranged. 

Chaz Churchwell: And, and then the, the thing is, is that like you have, but I, I'd love to hear you talk about the overhang. People talk about warrants and they talk about the overhang and basically investors. Taking issue with that because they say, Hey, we know that it, there's gonna be this tension point, this glass ceiling, because once you get to that price, now all of a sudden there's this dilution factor that's gonna kick in once the warrants get exercised.

Talk to that. Talk about that for a second. 

Long Long: Yeah, sure. Um, typically, you know, as long as the warrants aren't the crate, 'cause like I said, typically it's half a warrant, right? It's half a warrant or a quarter warrant something per unit, right? So the number of warrants typically outstanding is not that high.

Like for example, right now, say, you know, we are $200 million spac. That's 20 million public shares. That's 10 million warrants, right? So that's 10 million of additional potential dilution. If you're merging with say, a 1 billion or $2 billion company, you know, that's gonna be, you know, outstanding shares probably gonna be like 2 30, 2 40, 2 50 out there.

The number of warrants out there that dilution represents, you know, pretty s it is not that significant. That's number one. Unless, unless. You know, for the sponsor team, they, you know, purchase, you know, warrants with their, you know, for their private, you know, investments versus that, then that expanded. But that's a separate topic, right?

But typically, if you have a standard half, half a warrant, quarter warrant, a third or something like that, the typical, the number is not there. And that goes further down. Like for example, the management can choose to do a cashless conversion, right? So in which case that 10 million warrants. Would've represented 10 million shares.

But if you do a cashless conversion, you can only be diluted another. If you don't, you don't need the cash, maybe just three to 4 million shares, right? Or 4 million, 5 million. So there, so, uh, is the overhang there? Yes. But you know, if you're doing a merger, the size that you should be, and typically a PAC should be doing a merger with Target that's roughly, you know, four to five x at least the size of spac, you know.

Typically the dilution from the warrants is not a big overhang and it should not be a big overhang on the share price. 

Chaz Churchwell: Hmm, man, I appreciate that. Hey, everybody, long, long with us on the D SPAC podcast long. I'm so honored that you came on sharing time with us today. You've been phenomenal as a guest, and is there anything at all, just in closing that you would want to make sure that these targets get to hear about you, your team?

And, uh, and what you may be looking for on deals down the road. 

Long Long: Um, yeah, so I, I think, you know, I think, you know, I think covered pretty well, you asked the right questions during the call, right. And about what the type of target that, you know, a SPAC looks for. And, you know, and I think I covered it, but kind just in summary, right?

For, you know, for. My, my, you know, the spac, our community spac. That's it, man. 

Chaz Churchwell: Make your pl We 

Long Long: look at, you know, we really are looking for a company that is, you know, that's really has a clear mindset, vision that, you know, knows what they want and can, you know, are able to, and are willing to collaborate on the, you know, on the, you know, the merger process and with, you know, would be able to have mutual trust and know that we're trying to achieve a common goal.

And, uh, looking to, you know. To, you know, to, to minimize the friction delays and be able to get a deal done, you know, as soon as quickly, as soon as possible. 

Chaz Churchwell: I love it. Hey, long, thank you for being on today, man. It's been such a blessing, always to be in your presence. Everybody. Chaz Churchwell with the D SPAC podcast.

Have a great day,