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Money Stuff: SPAC Magic Isn’t Free

January 08, 2021
Money Stuff
Bloomberg

SPAC SPAC SPAC

Maybe the biggest capital markets story of 2020 was the boom in special purpose acquisition companies. A SPAC raises money from investors in a "blank check" initial public offering, puts the money in a pot, and goes out and looks for a private company to merge with.[1] In the merger, the target private company gets the money in the pot and the SPAC shareholders get shares in the new combined company; the result is that the target company has raised cash and gone public through the merger. It is an alternative to an IPO that can offer more speed and certainty and perhaps even a better price.

We have talked about SPACs before, but I have somehow neglected to express appreciation for the clever and elegant bit of financial engineering at the heart of the SPAC structure. Here's how a SPAC works:[2]

  1. You give me $10.
  2. I put your $10 in a pool with a bunch of other people's $10, held in a trust account at a bank.
  3. I give you back one share in the pool (representing $10 of money in the pool), and one-quarter of a warrant to buy another share for $11.50. (The combination of the share and part of a warrant is sometimes called a "unit.")
  4. I try to find a company to take public within two years.
  5. If I fail, I give you back your $10 with interest.
  6. If I succeed, I merge the pool with the company, giving the company the money in the pool and giving you and your fellow shareholders shares (and warrants) in the new combined company. Also I get a bunch of shares and warrants in the combined company, as a reward for my work.
  7. When I do this, I give you the choice to either (a) let your money ride and take a share in the new company or (b) get your $10 back, with interest.

One thing to notice here is that the share should be worth $10, since it is just a receipt on a pot of money held in escrow and can eventually be redeemed for $10 plus interest.[3] Perhaps it is worth more than $10: Perhaps I am a genius at finding and negotiating with companies, and there is a very high likelihood that I will find a great company, negotiate a sweet merger deal and give you a share in a new public company worth $20 or more. But you can just ignore that probability and plan to get your $10 back, so it's worth at least $10.

Another thing to notice here is that the warrant should be worth more than zero, because there's at least some chance that I'll negotiate a good deal, the stock will end up being worth more than $11.50, and the warrant will end up in the money. This is all high-variance stuff: Taking any private company public is an uncertain endeavor that could be a home run or a dismal failure, and a SPAC adds further uncertainty because it hasn't picked a private company to take public yet. It's a meta-IPO; you don't know if the company it acquires will be worth the price, and you don't even know what the company is yet. All this variance is good for the warrant's price: The value of a warrant—an option to buy a share of stock in the future for a fixed price—goes up as the volatility of the underlying stock goes up; the more uncertain the future value is, the more valuable it is to have an option to buy.

So in summary:

  1. You give me $10.
  2. I give you back a share worth $10.
  3. I also give you back a warrant worth $X, X > 0.

This is magic. I have created value from nothing. You give me $10, I give you back your $10 with interest, and I also give you another valuable thing. The warrant costs you nothing, and is worth something. 

This can sound a little vague and woo-woo—the warrant is valuable because it may turn out to be valuable in some uncertain future[4]—but it isn't. The warrant is a tradable instrument, though you have to wait a few weeks before it can be traded separately from the shares. But then you can sell the warrant. Someone will pay you today for that uncertain future value—that's how stock options work—so you can collect some cash.[5]

This is all quite well known to hedge funds. There are a number of hedge fund SPAC strategies of the more or less free-money variety. Mainly:

  • You buy a unit for $10 when the SPAC goes public, you sell the warrant for $1 when it becomes separately tradable, you keep your share, and when the SPAC announces a merger you redeem the share for $10. (Or you sell it in the market for $10 or more before that.) You have collected $1 in risk-free profit.[6]
  • You buy a unit for $10 when the SPAC goes public, you sell your share for $10 (or more) when it becomes separately tradable, and you keep the warrant. You have paid $0 (or collected a bit of money), and now you have a free option to buy potentially valuable shares of a future public company.

Where does the value come from? I used to build and market equity derivatives, and it is tempting to resort to the professional mystification, "it comes from monetizing volatility, that great yet under-appreciated resource." But that's not a very good answer; let's try to do better. 

I think the value of the share is fairly straightforward: It is worth $10 because there's $10 in a pot and you can always get your $10 back out of the pot. Easy.

The value of the warrant is a bit more mystical; it depends on volatility, on there being some nonzero chance today that, in the future, the shares will be worth significantly more than $11.50. The thing to notice is that if everyone did the free-money trade, then the warrant would be worth zero. People would buy shares for $10 and cash them out for $10, the shares would never be worth more than $11.50, the warrants would never be exercised, everyone would know this with certainty, and no one would pay any positive price to buy the warrants. Also no private companies would agree to merge with a SPAC because all the money in the pool would be redeemed.[7]

So the magical value created by the SPAC structure has to come from the likelihood that at least some, and preferably most, SPACs will find a target, merge with it, and roll over some shares into the target. This means that the magical value has to come from:

  1. People who buy shares of the SPAC and don't redeem, betting that the SPAC's deal will be good and the stock will go up; and/or
  2. The company that agrees to merge with the SPAC, issuing shares of its stock for the money in the pool.

Of course both of those sets of people could end up being happy. The company could go public, its stock could go up, the company could be happy that it was able to go public in a convenient way, the SPAC shareholders could be happy that they hung on to stock that went up. Everyone can win here. But part of the investors' and companies' winnings are, in effect, siphoned off to provide some free money to the people who did the free-money trade.

In December, my Bloomberg Opinion colleague Chris Bryant wrote about this phenomenon:

In effect, hedge funds are providing bridge loans that have enabled a host of famous names from the world of business, finance and politics to launch their own SPACs this year. The funds are often arbitrageurs, though, with no intention of remaining investors once a SPAC has found a merger target. Retail investors and institutional investors who hold SPACs as long-term investments once a deal is struck haven't always done as well.

Real-money investors who buy SPACs as a way to invest in an IPO-to-be-named-later are subsidizing hedge funds who buy SPACs for free money. Bryant's post draws on a paper called "A Sober Look at SPACs" by Michael Klausner of Stanford and Michael Ohlrogge of New York University, which they also summarize here. (They refer to the hedge funds who regularly do free-money SPAC trades as the "SPAC Mafia.")

The way public shareholders subsidize hedge funds is through dilution. Imagine a billion-dollar SPAC with 100 million shares, each sold for $10, and 25 million warrants, given away for free with the shares. When it acquires a target company, it will give the target company $1 billion—what's in the pot—and get back $1 billion worth of target-company securities. Those securities will have to be in the form of shares and warrants, because the SPAC's shares and warrants both roll over into the target. So the SPAC might get back $900 million worth of target-company stock for its shareholders and $100 million worth of target-company warrants for its warrant-holders. (Or whatever the right proportions are.) So the shareholders' $10 SPAC share will convert into a $9 target-company share. (Which is why a lot of hedge funds will redeem—better to take the $10!—leaving others to worry about the dilution.)

Of course it could go (much) better for the SPAC's shareholders. The SPAC could give the target $1 billion (the cash in the pot) and get back, say, $2 billion worth of target stock plus warrants. The $10 SPAC share will convert into an $18 target-company share and everyone will be happy. This can certainly happen, and often does; the valuation of a private company is uncertain, the SPAC is trying to drive a hard bargain, it has a lot to offer the target (in terms of ease of going public, a respected sponsor, etc.), so it can demand a lot of stock for its shareholders. In this case the free money is being subsidized by the target company, which is selling very underpriced shares to the SPAC to go public. People complain about IPO pops—about initial public offerings pricing below the actual value of the company—and this is the SPAC equivalent.[8] 

On the other hand it is in many ways worse than I just described. We have talked before about the expense of SPACs, but I have ignored them in the above discussion. I have ignored the fees SPACs pay to bankers for going public and for negotiating mergers. I have also ignored the fact that SPACs typically give their sponsors—the people who set up the SPAC and find the merger target—20% of their stock, for free or at a big discount, for their services. So in my example above, a billion-dollar SPAC would actually have 125 million shares, and 31.25 million warrants, and the $1 billion of target-company securities would have to be shared among them.[9] 

And then the fact that lots of shares are redeemed makes all this dilution much worse. Klausner and Ohlrogge write:

Redemptions also magnify the dilution initially caused by the promote and the warrants. Consider a hypothetical SPAC that sells 80 shares to the public and gives 20 shares to the sponsor for a nominal fee. That is, 80% of the shares are backed by cash, and 20% are not. If 50% of the SPAC's 80 public shares are redeemed, the sponsor's 20-share promote, initially equal to 25% of publicly owned shares, will equal 50% of the 40 remaining publicly owned shares. Equivalently, of the 60 shares remaining after redemptions, 67% have cash behind them, and 33% do not.

Redemption actually tends to be much higher than 50%. Mean and median redemptions for SPACs that merged between January 2019 and June 2020 were 58% and 73%, respectively. Over a third of those SPACs had redemptions of over 90%. To some extent, SPACs replenish the cash they lose to redemptions by selling new shares through private placements contemporaneously with their merger, but for most SPACs, the replacement is only partial.

They add:

The extent of redemption and refinancing in connection with SPAC mergers show that a SPAC's IPO and its financing of a target are largely independent of one another as an empirical matter. In most SPACs, over two-thirds of IPO proceeds are returned to shareholders and new equity is raised at the time of the merger. 

That is, the common perception of a SPAC is that it raises money now, in a SPAC IPO, and uses it later, in a SPAC merger, to take a company public. It is an accelerated IPO, a pre-IPO. Klausner and Ohlrogge argue that that's mostly a misconception: A SPAC raises money in the SPAC IPO, gives most of it back at the time of the SPAC merger, and then raises new money at the time of the merger to actually fund the newly public company. 

This is all pretty well-known stuff and there is a widespread view that SPACs will fix it. There is competitive pressure on sponsor promotes, investors are getting fewer warrants, and Bill Ackman's SPAC, which we discussed in June, gives some of its warrants as "tontine warrants," which aren't separately traded: If you redeem your shares, you lose your tontine warrants, and the non-redeeming shareholders get more of them. Rather than being free money for short-term investors, they are incentives for long-term investors. Byrne Hobart notes that "the same fee leverage that makes bad SPAC deals unusually bad makes the best of them quite a bit better," and in the long run if SPACs are good at finding good deals they will see fewer redemptions and less dilution.

Still there is a basic tension here: Part of the beauty of the SPAC is in its clever free-money structure, which gives big investors a good reason to give money to an entirely uncertain endeavor like taking public an unknown company. But all that free money is expensive.

SPAC SPAC SPAC SPAC SPAC SPAC SPAC

The free-money thing is the main bit of clever financial engineering in the SPAC, but there are others. For instance, U.S. securities laws have different disclosure rules for IPOs and mergers. IPOs, stereotypically, are small weird unknown companies raising money for the first time, so there are strict rules about how they communicate with investors. There is a "quiet period" where they can't make public statements about the stock, and it's virtually illegal to include future financial projections in an IPO prospectus. 

Mergers, meanwhile, have fewer rules. Unlike IPOs, they are not a critical access point for weird little companies to seek funding from naive investors; they're just, you know, regular companies combining with each other. So companies commonly do lots of public marketing of the benefits of a merger, and it's more common to include projections in that marketing. 

SPACs arbitrage these rules: The SPAC does an IPO first, when it is a pristine empty shell with nothing to say and no financials to project. Then it goes out and finds a target and does a merger to take the target public. As we discussed above, the SPAC might do a lot of marketing to take the target public: It wants to avoid redemptions and raise money in a private placement, so it has to convince investors of the value of the target. But that's merger marketing, not IPO marketing, so the rules are looser. The Wall Street Journal reported this week:

Publicity and forecasts of rapid growth have become routine aspects of the booming IPO alternative of going public through SPACs. The use of what are called blank-check companies, which go public with no assets and then merge with private companies, surged in 2020, raising a record $82.1 billion in 2020, up from $13.5 billion in 2019, according to Dealogic. ...

But as the tool gains favor, there are concerns about the regulatory differences between the two modes of going public. The prospect of wooing retail traders through media and inherently speculative projections brings heightened risk to stock-market investors, according to some venture capitalists and corporate-governance experts.

Because many of the companies are so young, the forecasts make them seem very attractive, said David Cowan, a partner at venture-capital firm Bessemer Venture Partners, who said he has short positions in several SPACs—meaning he is betting the stocks will fall from current levels. "These forward projections are a loophole to the guardrails the SEC has put in place to protect investors," he said.

I sometimes  think that the merger rules are better: The main thing investors are interested in is future earnings, so companies should be able to give information about the future so they can make an informed investing decision. The counterargument of course is that that information is going to be uncertain and biased.

Hybrid IPOs

I wrote a bit yesterday about the 2020 mini-vogue for "hybrid IPOs," an initial public offering where the company has more control over the order book and can pick an IPO price that accurately reflects investor demand. But I missed this excellent Business Insider article from December about how Unity Software Inc. pioneered the idea:

Unity wanted to do something different. But doing so risked turning off investors by asking them for more information than they were typically open to providing, so the company worked with Goldman to build a confidential portal for investors to input their offers directly.

That tool meant investors weren't required to share their orders with salespeople and gave some a sense of security because they knew their orders were being kept confidential and not being used to guide other investors. Only a few bankers at Goldman and a few more at Credit Suisse were permitted to see the entire order book, Jabal said.

"We wanted people to put in what they really felt it was worth and what they were actually willing to pay," she said. "And we just felt like that was the only way to get a true view of the actual demand curve of what people were really willing to pay."

In a normal IPO, investors will not want to put in bids at a high price, because (1) they'd rather pay a lower price and (2) the bankers will shop those bids to other investors, saying "hey everyone else is in for $25 so you should be too," driving up the price. This system, maybe, eliminates the second problem.

Direct listings

Of course you don't need to do a hybrid IPO anymore, because now you can raise primary money in a direct listing:

Hot tech companies and other startups will soon be permitted to raise money on the New York Stock Exchange without paying big underwriting fees to Wall Street banks, a move that threatens to upend how U.S. initial public offerings have been conducted for decades.

The Securities and Exchange Commission announced Tuesday that it had approved an NYSE Group Inc. plan for so-called primary direct listings. The change marks a major departure from traditional IPOs, in which companies rely on investment banks to guide their share sales and stock is allocated to institutional investors the night before it starts trading. Instead, companies will now be able to sell shares directly on the exchange to raise capital -- something that's not been previously been allowed.

Here is the SEC order approving primary direct listings. After reading that Business Insider story about hybrid IPOs, I am not convinced that companies will be clamoring to sell their stock to the highest bidder at the opening auction on the stock exchange: Other factors, like finding cooperative long-term shareholders, might also matter to companies. But if you are really mad about IPO pricing, and want to put your faith in the market to decide your stock price, this is a way to do it.

Robinhood IPO

Yes of course yes yes yes yes:

Robinhood Markets, the trading platform popular with novice investors, is considering selling some of its shares directly to its own users when it goes public this year, according to people familiar with the matter.

The Menlo Park, California-based company has weighed allocating a significant minority of the shares it will list to clients, said one of the people, who asked to not be identified because the details aren't public. No final decision has been made on how much stock it might sell to its own customers, or if it will proceed with the plan, the people said. ...

Allocating a big chunk of shares to its own users could mitigate the size of a big first-day trading rally in Robinhood's shares.

I submit to you that "mitigating the size of a big first-day trading rally" is not a worthwhile goal, and no company should try to prevent its stock from going up. But the point here is that the way Robinhood would mitigate the size of that rally is by pricing the IPO higher: Instead of pricing the IPO at $20 and watching the price rise to $40, you price the IPO at $35 and watch it rise to $40. Smaller rally, sure, but also more money for you. And the way to price the IPO higher is to find some big investors who are willing to pay a higher price for your stock, and sell the stock to them in the IPO. Or in this case instead of "some big investors" it's "thousands of extremely enthusiastic small investors." Robinhood customers are a huge source of aftermarket demand for lots of IPOs, surely they will be a huge source of demand for Robinhood's own IPO, and surely you should try to get them in as demand for the IPO itself (where you get the money) rather than wait for the aftermarket (where you don't).

Honestly if I were Robinhood I would consider doing an IPO only to customers. For one thing it would save some banking fees. It might even get you a better price. And if it works you have quite a proof-of-concept to take to other companies. "Don't go public with Goldman Sachs," you might be able to say, "go public with us, we might get you a higher price and we'll definitely get you a wilder shareholder base." I'm not sure Robinhood wants to get into the underwriting business, and I'm not sure every company would really want the unfiltered all-Robinhood-shareholder experience, but I feel like some would. 

Signal vs. Signal

Somewhere along those "oh Robinhood demand" lines, yesterday morning Elon Musk tweeted "Use Signal," and the stock of Signal Advance Inc. shot up from $0.60 to $3.76 per share. Signal Advance "is a technology development firm that has been developing its proprietary Signal Advance Technology which may significantly reduce signal detection delays associated with a variety of physical sensors"; as of yesterday, with that $3.76 stock price, it has a market capitalization of about $47 million. Perhaps Musk wants his 41.6 million Twitter followers to use Signal Advance's physical sensors. More plausibly he wants them to use Signal, the "cross-platform encrypted messaging service developed by the Signal Foundation and Signal Messenger LLC," which are not publicly traded companies. Obviously (?) if Elon Musk tweets that you should use a product, you go buy stock in the company that makes that product, and if you can't do that you buy stock in the company whose name is closest to that product. You might do this irrationally, because you don't know the difference between Signal and Signal Advance, or perfectly rationally, because you expect other people to do it and you want to get there first. Really any word that Musk uses can probably be converted into a stock ticker; I assume if Elon Musk tweeted "virtue is good," Virtu Financial Inc. would go up. 

Geezers

I have nothing really to add to it but maybe the best financial story I read while I was on leave was this Bloomberg Businessweek feature about "The Essex Boys: How Nine Traders Hit a Gusher With Negative Oil." We have talked about the basic story before: On April 20, 2020, the price of oil futures closed at negative $37.63 per barrel, apparently in part for technical reasons having to do with trade-at-settlement futures contracts. I described how TAS trading works, how a TAS trader could have made a fortune on April 20 by buying a ton of oil at -$37.63 (getting paid to buy it) and pre-selling it during the day at higher prices (getting paid to sell it), and how in practice it would be very difficult to tell whether that TAS trader was (1) providing much-needed liquidity and sensibly hedging his risk or (2) manipulating the market to make a killing.

But in December, at Businessweek, Liam Vaughan, Kit Chellel and Benjamin Bain profiled the actual TAS traders who made a fortune that day, and it is just a model piece of financial journalism. It clearly explains how TAS trading worked and how they made money, it captures the wild excitement of that day, and it is full of delightful detail about the traders, a group of nine "geezers" from Essex led by a former pit trader:

Paul Commins started his trading career buying and selling oil in the rowdy pits of London's International Petroleum Exchange, where, according to a former colleague, he was affectionately known as "Cuddles." He had the kind of broad cockney accent that wouldn't be out of place in a Guy Ritchie movie and struggled to pronounce his r's. As a result, his three-digit badge, which everyone wore at the IPE, contained the letters "F-W-E"—pronounced "fwee," the sound that would come out of his mouth when he tried to say "three."

Everyone in the article is like that. They "made $660 million among them in just a few hours." They were doing a basically working-class financial job: Funds wanted to sell oil at the settlement price, and these guys in Essex did the unglamorous work of selling oil for them and guaranteeing them that settlement price. Normally that's a way to make a bit of money; on April 20 it was a way to make fortunes.

The article is also appropriately ambiguous about whether this stuff was manipulation or just sensible hedging, but ultimately, and I think correctly, comes down on the geezers' side. Here's how it ends:

News of the win has been met with a mixture of incredulity and pride among London's trading community. ... "It's funny how if it was BP or Goldman Sachs that made the money, no one would bat an eyelid, but when it's a bunch of working-class lads, people say they're cheating," says one trader who knows them, expressing a widely held sentiment. "I say good luck to them." 

Me too.

Art Stuff

We talk sometimes around here about the artists of stock prices, people like Sarah Meyohas, who manipulated penny stocks so she could paint their stock prices and then sell the paintings to hedge fund managers, or James Gubb, who manipulated two South African stocks "in order to create the image of an 'up yours' middle finger in the price chart" because he was mad about something. "If you are planning to manipulate the stock market, make sure you have art-gallery representation first," I once said. These are what you might call fine artists, and protest artists, people who are driven by the Muse to trade stocks for art. But here is a fun Bloomberg interview from December with a commercial artist of stock prices:

Like many Americans, Gladys Estolas began trading stocks on the Robinhood app when the pandemic descended this year and kept her stuck at home. Estolas, who majored in graphic design at college, drew illustrations on her stock charts to show her husband the scenery she saw within the price lines. After one of Estolas's creations went viral on Reddit in August, she turned her new hobby into a side hustle called Stoxart—and now she says she's earned more from selling her illustrations than from day-trading. (She sells her pre-made prints for $45 to $180 apiece, while commissions can cost anywhere from $800 to $1,150.) 

There are pictures. They're pretty! And:

Who are your clients?

A lot of finance people, a lot of traders. A lot of my commissions, surprisingly, are company CEOs who want to buy them to commemorate their year. For example, ButcherBox—it's the same concept as delivering food but it's more of a curated, high-quality meat that they deliver to you—[the CEO] wanted to commemorate their [company's internal data] member chart. A lot of [buyers are] people who have been trading and investing in stocks and wanted to commemorate their best decisions.

Oh best decisions, sure, but I feel like if you work at a bank or a hedge fund and your colleague has an absolute disaster of a trade you are morally obligated to commission Estolas to illustrate it as a prank gift. "And here's where Jim's trade fell off a cliff, see, here's the cliff, there are little trees on top of it, you can see a hawk soaring over the cliff, what a pretty cliff, anyway Jim we just wanted you to have this so you'll remember that trade forever." 

How is Martin Shkreli doing?

Uh he is … thinking about … doing a podcast? This story about Shkreli falling in love with a former Bloomberg News reporter (not me), and then ghosting her and having his lawyers send a statement saying "Mr. Shkreli wishes Ms. Smythe the best of luck in her future endeavors," is quite something! "He told her she was one of the only people allowed to visit him, and mused about running for office or starting a podcast when he got out." Even from prison he is better at trolling than almost anyone else in the world; his podcast is gonna do great.

Things happen

Elon Musk is now the richest person in the world, passing Jeff Bezos. MSCI to drop Chinese telecoms companies from important indices. "Things that make sense on the internet, when spoken out loud, slip away from you as if you were trying to recall a dream." David Hasselhoff auctioning off KITT car from 'Knight Rider.' "Goldman has asked participants, who are graduates of the bank's entrepreneur-training program called 10,000 Small Businesses, not to wear the 'Storm the Hill' T-shirts that had been mailed out." Jamiroquai singer: I'm not the Capitol 'viking' rioter.

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[1] There's no requirement that the SPAC's target company be private, and it's not completely unknown for a SPAC to merge with another public company because the sponsor thinks it's a good deal. But the modern SPAC boom is explicitly pitched as an IPO alternative, so the norm is to look for private targets.

[2] This is a generic description but it is loosely based on Social Capital Hedosophia Holdings Corp. VI, Chamath Palihapitiya's latest, which went public last October under the ticker IPOF. Palihapitiya is a leading figure in the current SPAC boom; his Social Capital Hedosophia Holdings Corp., IPOA, went public in 2017 and later acquired Virgin Galactic Holdings Inc. to take it public. IPOB, IPOC, IPOD and IPOE came in between. There has been some evolution in terms: IPOA had one-third of a warrant per unit, while IPOF has one-quarter, etc.

[3] Arguably there is credit risk, and the two-year discount rate for this claim on a trust account should be higher than the short-term bank rate that the trust earns, but never mind that.

[4] Byrne Hobart summed this up by saying that "To the SPAC investor, it's a subpar money market fund with a Kinder Surprise Egg-style option attached: invest, and for the cost of tying up your capital for a while, you have the option to get… something."

[5] So for instance IPOF's warrants closed at $2.02 on their first day of trading separately from the shares (at the end of November). The shares have never traded below $10. Each share came with one-quarter of a warrant. So you put in $10 and got back a $10 share and $0.50 worth of warrant. Free money!

[6] This is not investing advice and in the real world I am sure you could find some risks. I am trying to be sort of abstract here. 

[7] If for instance I announced a SPAC with all the normal SPAC terms, but said "I will under no circumstances look for or accept any acquisition deal, I'm just going to sit on your money for 24 months and give it back," the warrants of that SPAC would be worth $0 at all times.

[8] I have argued that the Nikola Corp. SPAC merger had a 240% first-day pop, that is, it sold $34 worth of stock for $10. That is an outlier, but certainly SPAC sponsors should hope that they're getting more than they're paying for.

[9] The sponsors can't redeem their shares for $10 in cash, so each regular share still represents 1/100,000,000th of a $1 billion pool of cash *if you redeem*. But it represents 1/125,000,000th of a $1 billion pool of cash when that cash is used to buy a company, if you choose to roll over into the company.

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