Gary Silverman interviews legendary Silicon Valley investor Sand Roberston for the FT. Silverman writes of the interview:
Sandy Robertson is worried about what’s happening in the markets these days, and that matters. Few people in the financial world have seen more than he has.
Robertson is best known as a pioneering dealmaker in Silicon Valley, where he helped start two of the “Four Horsemen” investment banks that dominated technology underwriting in the 1990s — Robertson Stephens and Montgomery Securities. But his career dates to the 1960s, when as a Smith Barney broker covering Nebraska and Iowa, he helped an Omaha client named Warren Buffett build a position in American Express.
Now, preparing to celebrate his 90th birthday on Friday, Robertson is still surveying the scene as a director of Salesforce, and a founding partner of private equity firm Francisco Partners. While he does not detect the kind of mania that prompted him to warn about lofty internet valuations in 1999 — only months before the bubble burst — he believes “we are in a very frothy period here, too”.
“I told my younger partners, let’s not confuse a bull market in technology with investment judgment,” he said in a telephone interview with the Financial Times. “The public market looks very frothy to me.”
One warning sign for Robertson is the explosive growth in the number of blank cheque companies, known as Spacs, or special purpose acquisition companies, that generally raise money from investors with the intention of making a deal in two years. This year, 320 Spacs have gone public in the US, up from only 12 in all of 2016, according to Refinitiv.
“This Spac thing is very indicative of the later stages of a cycle,” he said. “There are some of them that are pretty good, but at the bottom there is a lot of junk.”
Robertson is not opposed to Spacs on principle. The danger for him is that there are simply too many buyers circling a limited number of appropriate acquisition targets.
“The seller has the advantage on price,” he said. “They [the Spacs] are going to pay too much. It’s the proliferation of them that I’m worried about.”
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