REUTERS/Steve Marcus
- Dan Loeb underscored the value of SPACs in his recent investor letter.
- The Third Point chief's winning bets last quarter included Upstart and SentinelOne.
- Loeb expects a near-term economic boom, but predicted a surge in bad debts.
- See more stories on Insider's business page.
Billionaire investor Dan Loeb praised special-purpose acquisition companies (SPACs), touted his lucrative bets on private companies, and delivered a bullish market outlook in his latest letter to investors.
The Third Point chief highlighted the record number and size of SPAC announcements in the first quarter of this year. He welcomed the recent correction in that market as it relieved "some of the excesses evident in speculative deals." Moreover, he noted threats of stricter regulation "took some of the wind out of the SPAC market's sails."
Loeb trumpeted the role of SPACs in expanding the pool of listed companies, and helping younger businesses to access public markets and capital. "Despite recent bumps, we think SPACs are here to stay," he said.
Third Point's best-performing investments last quarter were Upstart, SentinelOne, and Social Finance (SoFi), Loeb's letter revealed. The fund first invested in Upstart at a $145 million valuation about six years ago. Its 15% stake is now worth around $1.2 billion following the AI-powered lender's IPO in December.
Similarly, Third Point backed SentinelOne at a $73 million valuation, and the cybersecurity group is planning to go public at a $10 billion valuation later this year, according to Bloomberg.
Loeb also offered a rosy outlook for financial markets and the US economy. "We remain constructive on the backdrop for risk assets," he said, citing ample liquidity in markets, loose monetary and fiscal policy, and a supportive Federal Reserve.
However, the investor highlighted pandemic-hit supply chains, accelerating cost inflation, labor shortages in some industries, and the prospect of higher corporate and personal taxes as concerns.
Loeb expects the US economy to roar in the coming months. Yet he warned that future interest-rate hikes, mounting debts, and uneven growth would fuel a buildup of risky debt as federal support fades and the private economy takes over.