SPACs Are Booming but Are We Back in Bubble Territory? | Louis Camhi of RLH Capital

Episode Summary

Executive Summary: Louis Kami of RLH Capital argues the SPAC market is rebounding from its post-2021 collapse as lower volatility, potential rate cuts, and renewed IPO optimism bring issuers back. He explains how RLH focuses on lower-risk SPAC entries, selective warrants, bridge loans, and pipes, while emphasizing that today’s market is more disciplined, theme-driven, and increasingly tied to crypto, nuclear, and other hot sectors.

Main Topics: SPAC market rebound and IPO cycle (Priority: 5/5): Kami says SPAC issuance has picked up sharply in 2025, but the recovery depends on broader IPO reopening, low VIX, and interest-rate cuts. He sees current activity as an indicator that sponsors expect public markets to improve. SPAC 101: trust floor, redemption, and D-SPAC risk (Priority: 5/5): He explains the core SPAC structure: cash sits in trust, investors can redeem at vote, and the SPAC phase offers downside protection. Once a deal closes, it becomes a D-SPAC with ordinary equity risk and no trust floor. Deal selection, leverage, and downside protection (Priority: 5/5): RLH prefers owning SPACs below trust and often exits before or at the vote. Kami says leveraged exposure only makes sense when downside is protected; once a SPAC trades above trust, the risk-reward can become unattractive for his style. Crypto as the dominant theme in SPACs and pipes (Priority: 4/5): The strongest current trade is crypto-related structures, especially treasury companies and high-volatility names. Kami views this less as pure crypto bet selection and more as cost-of-capital arbitrage supported by public-market demand. Warrants, Black-Scholes, and volatility mispricing (Priority: 4/5): RLH is selectively re-entering warrant exposure, especially where deal announcements or high implied volatility make warrants appear mispriced. He highlights change-of-control provisions and volatility-driven optionality. Bridge loans, SPVs, and fund structure evolution (Priority: 4/5): RLH is expanding into small bridge loans and created SPVs to give LPs access to the most attractive non-core opportunities. The fund keeps most capital in lower-risk SPAC positions and a smaller slice in higher-risk opportunistic trades. Market professionalism improving after the SPAC bust (Priority: 3/5): Kami argues the market is more disciplined now: sponsors are more experienced, bankers are more commercial, and targets are more sophisticated about fee cuts and promote forfeitures when economics are weak.

Key Arguments: SPAC issuance is rising because capital owners need liquidity and public markets are gradually reopening after a long IPO drought. The best SPAC setup is one where arb investors hand off to fundamental investors after a good deal is announced, allowing both price discovery and sponsor credibility to improve. RLH’s style is to prioritize downside protection; the firm generally avoids owning SPACs on leverage once they trade above trust. Current enthusiasm is concentrated in a few themes—crypto, nuclear, and policy-adjacent businesses—rather than broad-based SPAC activity. Crypto treasury transactions are attractive because companies with access to cheaper financing can justify premium valuations relative to NAV or capital structure economics. Warrants may offer value when implied volatility is high and Black-Scholes suggests the market is underpricing optionality, especially in volatile crypto-linked deals. The SPAC market is healthier than in 2021 because sponsors, bankers, and targets are now more willing to share economics and negotiate terms when capital formation is weak. Bridge lending exists because these are small, labor-intensive financings that large lenders often ignore, creating a niche for specialized funds like RLH.

Data Points: SPACs seeking a target: 145 - Kami says there are about 145 SPACs currently searching for acquisition targets. RLH fund allocation to public SPACs: 85% - He says the core fund is structured so most assets stay in publicly traded SPACs for liquidity and downside protection. RLH allocation to higher-risk opportunistic trades: 15% - The remaining portion is reserved for bridge loans, non-redemption agreements, and pipes. Typical bridge loan size: $1 million to $3 million - Kami says RLH writes relatively small loans compared with larger lenders. Typical larger lender preference: $25 million to $50 million - He contrasts RLH’s small checks with the size larger lenders usually prefer. SPAC capital raised in example: $200 million - Used in his SPAC 101 explanation as an illustrative example of sponsor fundraising into trust. Warrant strike price: $11.50 - He explains standard SPAC warrants typically carry an $11.50 strike. Upexi offering price: $2.28 - He says the Solana treasury company was priced at 228 cents in its financing. Upexi later trading level: in the $3s - He notes the stock had risen into the low $3 range after the unlock. Upexi intraday high: $20 - He says the stock later spiked as high as 20. SBET initial price: about $6 - He references an Ethereum treasury transaction that started around six dollars. SBET high price: $50-$70 - He says it later spiked to roughly 50, 60, or 70 dollars. Implied volatility example: 70% - He uses this as a benchmark for evaluating crypto-linked warrant value. CoreWeave deal: 1 major IPO in Q1 - He cites CoreWeave as a rare standout during a period of weak issuance. Arrow financing target: $75 million raised - He says Arrow ultimately completed a traditional IPO and raised about 75 million. Loan duration example: 4 months turned into 16 months - He jokes about a bridge loan to Arrow becoming much longer than expected.

Pivotal Quotes: "Nothing we say here is investment advice as well. Nothing we say is marketing or advertising for RLH Capital or any of their funds." — Host: Opening disclaimer setting the tone for an informational discussion. "If you're concerned about the market and you can put yourself into an investment like a SPAC where the downside is protected and you have some upside optionality, that's a pretty comfortable place to be." — Louis Kami: Explaining why SPAC issuance is attractive in a volatile macro environment. "You want to have your tech fundamental investors looking at this deal and saying, yes, it's a good deal." — Louis Kami: Describing the ideal handoff from arbitrage investors to fundamental investors after a SPAC deal announcement.

Implications: The SPAC market is not back to 2021-style froth, but it is reactivating with more discipline. Investors should expect theme-driven deals, selective volatility trades, and more emphasis on structure, redemption protection, and economics than before.