Not all SPACs will 'make it over the finish line,' Gary Cohn says

Published Mon, Sep 14 202011:48 AM EDT

(This story is for CNBC PRO subscribers only.) Special purpose acquisition companies are on track for a record-setting year, but former Trump economic adviser Gary Cohn told CNBC on Monday that not all SPACs are going to "make it over the finish line." His comments come after he teamed up with former hedge fund manager Cliff Robbins to launch their own SPAC. Called Cohn Robbins, the fund initially sought to raise $600 million, but has since boosted the offering to $720 million. "We think there's a real opportunity here in middle market companies," he said on CNBC's "Squawk on the Street." "We're really looking at sort of three to 10 billion-dollar companies that are getting overlooked in this economic cycle. We've seen what's gone on in the market where the big-cap companies are doing well, but some of the small-cap companies are suffering," he said. According to SPAC Research, blank check companies have already raised more than $37 billion this year, significantly ahead of 2019's total of $13.6 billion. A number of high-profile investors are driving the charge, including Pershing Square's Bill Ackman and Starboard Value's Jeffrey Smith. Former House Speaker Paul Ryan has also launched a SPAC, as has Oakland A's executive Billy Beane of "Moneyball" fame. Amid what some might call market saturation, Cohn said his investment fund stands out due in part to its large size. "I think that you'll see over time, [SPACs] will get thinned out," he said. "I've heard this argument time and time again in financial markets, 'Oh there's way too many of them,' and that can be true, but what tends to happen is the better ones rise to the top and the weaker ones spin out and fall out the bottom," he said. He noted that unlike some of the other SPACs where those at the top are also overseeing other business ventures, he and Robbins are focused exclusively on their new fund. He said they're looking for a company that has real long-term growth potential, and one that they can be involved with through sitting on the board and helping the company grow market share. SPACs are also known as blank-check companies, since investors hand over money without knowing when, or even what for, their capital will be used. Once the SPAC goes public, the goal is then for it to acquire or merge with a private company, taking it public in the process. Investors then have the option to become shareholders in the newly combined company. For the private company, it's a less risky way to go public on an often accelerated timeline, and without having to jump through all of the SEC's regulatory hoops. Cohn added that his fund will bring price transparency and cash to the table, while taking away a lot of the risk. The fund sees attractive trends in consumer, software and fintech companies, although ultimately could pursue a deal in any industry or sector, according to a filing with the Securities and Exchange Commission.

Gary Cohn, adviser to Springcoin Inc. and former director of the U.S. National Economic Council, speaks during the Context Summits Leadership Day in Miami, Florida, U.S., on Wednesday, Jan. 30, 2019.

Scott McIntyre | Bloomberg | Getty Images

(This story is for CNBC PRO subscribers only.)

Special purpose acquisition companies are on track for a record-setting year, but former Trump economic adviser Gary Cohn told CNBC on Monday that not all SPACs are going to "make it over the finish line."

His comments come after he teamed up with former hedge fund manager Cliff Robbins to launch their own SPAC. Called Cohn Robbins, the fund initially sought to raise $600 million, but has since boosted the offering to $720 million.