Paul Glazer stood awkwardly in a dark-blue suit at a podium at the Tel Aviv Stock Exchange.
The occasion: the 2018 kickoff for the sun-drenched local franchise of the Sohn Investment Conference, a pediatric cancer charity.
Other Sohn speakers that day included Jefferies global strategist David Zervos, Seth Fischer of Hong Kong hedge fund Oasis Management, and activist Bart Baum of Ionic Capital Management. They all crowded together in front of a wall of videos to press a blue switch to start the day’s trading.
“The market is open,” a computer-like voice droned amid cheers and applause, according to a video of the event.
It’s fair to say the lean, six-foot-two Glazer, founder of an obscure, eponymous hedge fund, wasn’t the star of the event.
None of the Sohn conference speakers or organizers contacted by Institutional Investor recalled his presentation. The exchange executive overseeing the event doesn’t remember Glazer at all.
As one conference organizer wisecracked, “He’s not the kind of guy who is going to set the room on fire with a stock pick.”
Fast-forward three years. Glazer today is sizzling . . . and getting the attention he didn’t get at Sohn.
In 2020, his Glazer Enhanced Offshore fund, Glazer Capital’s leveraged flagship, generated a 38 percent return, versus 5.2 percent for the HFRI merger arbitrage index. Through June 30 this year, it has battled whipsawing volatility, nevertheless generating a 9.25 percent gain and edging out the 8.59 percent return for the bogey once again.
The fuel powering Paul Glazer’s gains: SPACs, or special purpose acquisition companies, the shiny, celebrity-studded product that exploded in popularity in 2020 and continues to grab headlines daily. The 58-year-old New Yorker has positioned his $2.4 billion fund as Wall Street’s most ravenous purchaser of SPACs, some of which, as in the case of DraftKings, popped 100 percent or more after their mergers.
SPACs, or blank-check companies, are simply publicly traded pools of money raised with the intent of finding and buying a private company. Until recently, they were white-hot.
And Glazer Capital is tops. With $5.5 billion in SPAC stock holdings as of March, the firm is the hedge fund industry’s biggest player, ahead of giants Millennium Management, with $5.1 billion; Magnetar Financial, with $4.2 billion; and Citadel, with $3.8 billion, according to SPAC Research.
The irony is that Glazer toiled for decades building a reputation for caution and risk aversion — not exactly the résumé you would expect from a SPAC-surfing hotshot. He navigated the dot-com cataclysm of 1999–2000, delivering double-digit gains in back-to-back years. In 2008, as the Standard and Poor’s 500 Index fell 38.5 percent, Glazer’s flagship fund rose 8.9 percent.
The fund has never posted a calendar-year loss. And not many monthly drawdowns either, according to its marketing materials.
“He was the safe play,” says Robert Lee, managing member at Windmuehle Funds, who invested with Glazer in the past at the Employees Retirement System of Texas. “He’s not the guy to knock it out of the park. This SPAC mania really just fell into his lap.”
Why the surge? Look no further than Social Capital Hedosophia, founded by venture capitalist Chamath Palihapitiya. It bought Richard Branson’s spaceship company, Virgin Galactic Holdings, and then rocketed by more than 400 percent. Or VectoIQ Acquisition Corp., which purchased electric–pickup truck maker Nikola and tripled in value within a week.
This year is yet another gusher for new issues: SPAC IPOs totaled 379 through late July, raising $114.5 billion.
In mid-February, however, SPAC prices faltered and then fell and the new-issues torrent ran dry, with the number of SPAC IPOs tumbling. The SPACInsider index is off by half since February 18.
A reckoning looms. The supply of decent, profitable acquisition candidates is running short. And SPAC and other cash is piling up fast.
The challenge for Glazer now is navigating a suddenly more treacherous SPAC market where public skepticism of mergers is on the rise and the flow of new SPAC issues has slowed to a trickle, with scant hope of a meaningful rebound.
The tailwinds that sped the market are unlikely to return. “The volume of SPAC IPOs over the past year was unsustainable,” says finance professor Jay Ritter of the University of Florida’s Warrington College of Business. “The huge issuance of supply swamped the market.”
Glazer, through a spokesperson, declined to comment for this story and did not allow firm employees to talk to us either. Ditto his family members.
“I can’t say a word without my brother’s permission,” quips older brother Roy Glazer, an affable corrections counselor in upstate New York.
As for Glazer Capital, SEC filings show its funds, undaunted, continuing to scoop up SPACs by the bushel. As of March 30, the firm had disclosed ownership positions in more than 800 publicly traded SPACs and their related warrants.
Roughly half of Glazer’s assets are invested in SPACs, according to a person familiar with the fund, with the balance mostly in traditional merger arb positions and bonds.
Among the most prominent holdings: RedBall Acquisition Corp., looking for sports- and media-related deals and co-chaired by Billy Beane, the former Oakland Athletics general manager of Moneyball fame. Another is Reinvent Technology Partners, whose co–lead directors are Reid Hoffman, co-founder of LinkedIn, and Mark Pinkus, founder of gaming company Zinga.
Despite the volatility, Glazer has doubled down with two new SPAC strategies. In October, the firm started the Glazer Index Plus fund, overseen by Glazer and Mark Ort, a part-owner who joined the firm in 2001. The fund tracks the S&P 500 and uses an overlay of Glazer’s SPAC, merger arb, and special situations strategies as it seeks to beat the index every calendar year.
There is no management fee and a 30 percent carry for any performance above the S&P 500’s return as a hurdle.
In February, the firm kicked off Meteora Capital, which invests in different parts of the SPAC capital structure. That includes the general partnerships of SPAC sponsors, financing deals, and the post-SPAC companies themselves.
Meteora is run by Vik Mittal, who joined Glazer in 2005 and is a portfolio manager and another part-owner of the firm.
Thanks to the SPAC phenomenon, Glazer gets courted by sponsors seeking his money, imprimatur, or counsel. That gives him and his colleagues a ringside seat and special entrée to the market. “They are on the must-see list for your deal,” says Don Duffy, president of ICR, a strategic adviser to SPACs. “They talk to everybody.”
Glazer’s behind-the-scenes dealings are murky. The firm’s Form ADVs show it can invest in private SPAC securities in addition to nonpublic sponsor interests and financing like private investments in public equity, or PIPEs.
Chris Bradley, chief financial officer of Tastemaker Acquisition as well as two other SPACs, says of Glazer Capital in an email: “Setting aside their balance sheet, which has been important to SPAC issuers, they’re smart and ethical. They’re also creative, and are supporting SPAC sponsors — both getting through the IPO and on the back-end funding.”
Glazer is the alpha dog of the SPAC universe. Notes Duffy: “You want to listen to their advice.”
It’s all quite a turn for a bookish stock picker who worked in obscurity for years.
Glazer was the youngest of three siblings. His mother, Irma, was a homemaker and his father, Saul, was a certified public accountant who imparted the basics of income statements and balance sheets.
Glazer attended Royalton-Hartland High School in nearby Middleport, where he played tennis, ran cross-country and, between his junior and senior years, attended Harvard University summer school.
From there it was off to the Wharton School of the University of Pennsylvania, where in 1985 he picked up a BS in economics.
Glazer headed west and launched his career as an analyst at Houlihan Lokey, a Los Angeles investment bank with a specialty in valuations. In 1986, he nabbed a spot on the block trading desk at Jefferies, the pioneering third-market brokerage firm founded by Boyd Jefferies.
In 1988, Glazer jumped to the Los Angeles office of Bear, Stearns & Co., a firm then under the stewardship of the legendarily quotable Alan “Ace” Greenberg, a cigar-chomping, bridge-playing trader who built the investment bank into a merger arb powerhouse.
Greenberg eschewed Ivy League MBAs in favor of candidates he called “PSDs,” for “poor, smart, with a deep desire to become rich.” He was also noted for thriftiness, demanding employees recycle paper clips, and for penning risqué memos. “Never laugh at a millionaire, never hit a cripple, and never have sex with an idiot,” he once wrote.
At sharp-elbowed Bear Stearns, the soft-spoken Glazer developed a network of clients including hedge funds, registered investment advisers, and family offices, according to a bio published for a charity event.
Glazer, from his base in LA, was soon heading institutional option sales for the western United States. He became familiar with merger arb and other strategies.
Outsiders and investors are clueless as to why, but in 1992 Glazer left Bear Stearns, not for a rival bank but for a Jerusalem yeshiva, or Jewish seminary, called Machon Shlomo.
Machon Shlomo, according to its website, caters to professionals and offers one- or two-year programs. One focus is study of the Talmud, the primary theological text for rabbinical Judaism. Glazer stayed two years, developing a working knowledge of Aramaic, the ancient language found in sections of the Hebrew bible.
Representatives of Machon Shlomo did not respond to emails.
Rabbi Mark Wildes, a friend who has worked with Glazer on New York Jewish religious initiatives, points out that the Talmud preoccupies itself not just with theology, but also with business and other ethical issues. Example: Is the owner of an ox responsible if it gores a sheep owned by a neighbor? (Short answer: Yes).
“It gives you reasoned legal analysis,” says Wildes. “They’re discussing law — property, torts, property contracts. It’s on the one hand very analytical and on the other very abstract.”
Glazer returned to New York in 1995 and joined Oscar Gruss & Son, a small merger arbitrage firm founded by Polish émigrés in 1947. According to a bio published by the Jewish Federations of North America, Glazer expanded his client base and contacts to include the proprietary trading desks at the biggest investment banks.
In late 1998, Glazer left to start his own firm. A little over a year later, he married Lisa Beth Castleman, a Fox News Channel reporter. They live today on a leafy street on Manhattan’s Upper West Side with their four children, two sets of twins.
Glazer and his wife keep a very low profile but occasionally hit the Jewish charity circuit, including the Manhattan Jewish Experience, a religious and cultural organization run by Rabbi Wildes.
Before the pandemic, the couple was fond of hosting Friday night Shabbat dinners for large groups. Lisa Beth Glazer is known for her braised beef ribs, the rabbi says.
Still, Paul Glazer is utterly devoid of bling. Tall with graying hair, his most colorful escapades are visits to his sister, Shari, in Israel and periodic family ski trips to Colorado.
Glazer has attended to building his merger arb business, on occasion waging proxy battles when he thought buyers were underpaying.
Says one investor: “He’s old-world Wall Street. No bullshit.”
Although the views are impressive and Soros Fund Management has offices on the 39th floor, the Skidmore, Owings & Merrill–designed skyscraper definitely sits on cut-rate real estate, overlooking ragged Eighth Avenue, with plenty of vacant storefronts nearby. Next door is Vida Verde, a Mexican cocktail bar featuring a “boozy bodega” and a rooftop “margarita market.” Glazer has never been inside, according to a spokesperson.
Like Greenberg, Glazer hires so-called PSDs — or at least those without gilt-edged résumés. Portfolio managers Mittal and Ort, for example, are alumni of the University of Florida and Touro College, respectively, not MIT or Stanford.
Other analysts and traders graduated from Fordham University and the University of Texas at Austin. Résumés on LinkedIn show employees’ former stints not at white-shoe investment banks but at landscaping firms and the Subway chain, preparing sandwiches.
Glazer forbids swearing in the offices, according to a person familiar with the fund, and for what it’s worth seems to have trouble provoking a negative comment from just about anyone. “He’s a pleasant, soft-spoken guy,” says one rival investor.
Glazer’s performance during the fund’s first two calendar years was propitious. During the dot-com bubble, investors ignored merger arb, creating opportunities. In 1999, the fund returned 28.1 percent, with a 26.1 percent gain in 2000.
Generating numbers like that is possible with a tiny asset base. A modest $1 million initial stake afforded Glazer the opportunity to invest in small deals where the spreads between market and target prices can be wide even if they go unnoticed on Wall Street.
In 2006, for example, he scored with shares in Benthos, a tiny manufacturer of high-tech marine gear, the target of a takeover by Teledyne Technologies. Price: just $41 million.
An age-old adage of merger arbitrage served as Glazer’s lodestar: The key to success isn’t making money, it’s not losing it.
“Merger arb is a pennies-before-the-steamroller type of strategy. Glazer is just better at it,” notes Robert Lee, who once oversaw $2 billion at the Employees Retirement System of Texas. “He’s got a feel for deals better than anybody I’ve ever seen.”
Glazer Capital’s parameters for minimizing risk seem basic. The firm, like many rivals, invests only in announced deals, says one manager who has invested with Glazer for more than ten years.
Paul Glazer won’t wager on transactions with undue regulatory risk. Assessing management’s commitment to a transaction doesn’t hurt either, says a person familiar with the fund.
In doing so, Glazer sidesteps lurking dangers. Says Lee: “He sees signals where others don’t. That comes with experience.”
Among the merger debacles Glazer avoided in the past decade are the abandoned purchases of T-Mobile USA by AT&T in 2011 and of Allergan by Pfizer in 2016.
Most important, in the case of SPACs, Glazer prefers to sell when a merger is announced, booking profits and moving on, and so avoiding the risks of holding public, sometimes dicey companies long-term.
The result is impressive risk numbers. The Enhanced fund’s annualized standard deviation — the variation of the fund’s market value around its mean — was just 6.88 percent, according to a January firm report. That’s about half that of the S&P 500.
The fund’s worst monthly loss was 8.86 percent, versus 12.35 percent for the benchmark, the report says.
Glazer has done this while his Enhanced fund has trounced its hedge fund bogey since it started, beating the HFRI merger arb index by 10.63 percent annualized versus 4.1 percent, according to the January report.
Glazer also looks after existing investors, swatting away prospective ones unless he feels his fund can manage additional assets.
In 2013, while at Texas ERS, Lee recalls being kept waiting nearly a year for Glazer to reopen the gates.
“Just be patient,” Glazer repeatedly told Lee.
“It was a dinky little fund,” Lee says, chuckling. “He was exercising his fiduciary duty.”
After launching amid the dot-com explosion, Glazer Capital settled into a routine of stable returns. Save for a 13.7 percent gain in 2006, calendar-year returns were in the single digits, ranging from 2.91 percent to 8.85 percent.
Then came the 2008–’09 financial crisis, and opportunities in a quirky newfangled financial product. SPACs actually had been around for decades but had evolved, adding nifty new features over time to lure investors.
In the current iteration, a sponsor raises money to fund a SPAC via a traditional IPO at what is typically $10 a share. The bounty is earmarked to finance the SPAC’s acquisition of an undetermined private operating company, which is the task of the sponsor to find. If the sponsor, who stands to get a fat, heavily discounted slice of any combined company, fails to close a deal within 12 to 24 months, stockholders are redeemed for the initial $10 a share, plus interest. Any SPAC stockholders who don’t like the terms of the merger can also get their money back at par plus interest.
If that sounds like a deal, there’s more: Investors buying SPAC shares at the IPO get warrants to purchase more after the merger. They get to keep the warrants even if they redeem their stock. Glazer holds scads of them.
Seems tough for investors to lose much if they don’t overpay.
But during the financial chaos of 2008–’09, SPACs were changing hands at deep discounts, trading at $8.50 to $9 a share versus $10 par values. “People had to get out, and there was no bid,” says Roy Behren, managing member of Westchester Capital Management, which runs merger arb and event-driven funds.
As the collapse of stocks continued in the first quarter of 2009 — the S&P 500 was down 38.5 percent in 2008 — Glazer jumped in, scooping up SPACs like BPW Acquisition Corp., Columbus Acquisition Corp., and Global Brands Acquisition Corp., among others.
Glazer returned 13.9 percent in 2009 — though it’s unclear what contribution SPACs made to that performance.
(BPW merged with women’s clothing retailer Talbots, Columbus bought a drilling equipment maker, and Global Brands inked a deal to become a real estate investment trust.)
Glazer was not alone. “It was great, and we got into it,” says Behren. “From an arb perspective, you can’t lose much. You have this asymmetric risk-reward profile.”
In 2010, Glazer rolled out the Enhanced fund, which is leveraged to goose returns and quickly grew to be the firm’s flagship.
Fast-forward to early 2020. Amid the galloping Covid-19 pandemic and cratering asset prices, investors were casting about for the next big thing.
Shares of several recent boldfaced sponsored SPAC deals, like that for Branson’s Virgin Galactic, soared following their initial offerings and subsequent mergers, grabbing investor attention. Some investors were undoubtedly trying to make up for losses suffered in the stock markets’ collapse.
Others were simply greedy Reddit fans hunting for “story” SPACs targeting trendy areas like electric vehicles, online gambling, and batteries. “Investors are just looking for new opportunities,” explains Dave Sekera, chief U.S. market strategist for Morningstar.
And Wall Street is happy to furnish those opportunities.
His firm was a big holder of shares in DiamondPeak Holdings Corp., which in August 2020 announced its purchase of Lordstown Motors Corp., an electric-vehicle maker. Hindenburg Research published a March report alleging, among other things, that the company was significantly overstating preorders. The Securities and Exchange Commission has subpoenaed Lordstown concerning its preorders as well as the DiamondPeak merger, and the Justice Department is investigating the company.
Glazer also owned stock in Churchill Capital Corp III, managed by serial SPAC financier Michael Klein. Churchill bought MultiPlan Corp., which provides bill-paying and other analytics to hospitals, from private equity firm Hellman & Friedman in October.
According to a November report by short-seller Muddy Waters, MultiPlan failed to disclose that its largest customer, UnitedHealth Group, had developed its own, competing bill-paying system, putting some 35 percent of MultiPlan’s annual revenues at risk.
Another Glazer investment: the common stock of Pivotal Investment Corp. II, which bought XL Fleet Corp., a manufacturer of hybrid, mileage-enhancing systems for truck fleets, for about $350 million in December. In a March report, Muddy Waters alleged that a previous Series D funding round valued the company at just $73 million.
Muddy Waters, which was short the stock, also alleged that the company’s backlog is overstated, as are its claims of improved fuel efficiency, among other things. “XL is more SPAC trash,” Muddy Waters stated.
A MultiPlan spokesperson declined to comment on Muddy Waters’ report. An XL Fleet spokesperson referred to a March press release disputing the “factual accuracy” of Muddy Waters’ calculations and calling its claims “flawed.”
In June, Lordstown announced the results of a special committee investigation disputing many of Hindenburg’s allegations while acknowledging that company disclosures about preorders were indeed inaccurate. Lordstown CEO Steve Burns and CFO Julio Rodriguez resigned the same day. A company spokesperson declined to comment beyond the investigation’s findings.
Surely, Paul Glazer can’t be faulted much for buying into SPACs that ultimately buy damaged goods. And in one important sense, it doesn’t matter to his fund.
Lordstown, MultiPlan, and XL today are trading below their $10 IPO prices, at $7.29, $7.83, and $6.85, respectively. But though others are hanging tight, SEC filings suggest that Paul Glazer, as is his modus operandi, has sold.
“The SPAC phenomenon will end badly and leave many casualties,” wrote Paul Marshall, co-founder of $55 billion hedge fund Marshall Wace, in an April letter to investors. The fund, a major buyer of SPACs, is shorting them, Marshall noted, citing a deterioration in the quality of recent deals.
Competition for targets is up. “We are going to see bidding wars between SPACs themselves, as well as with private equity,” says Morningstar’s Sekera. “There’s a lot of dry powder out there. It’s a limited number of companies that you’re going to be interested in.”
None of this sounds particularly good.
One thing is for sure: Glazer is no longer the cipher he was before SPACs’ explosive surge in popularity. In March, Allocator.com, an analytics service, unveiled its Investors Choice awards for 2021 via Zoom. The awards are determined by Wall Street professionals using quantitative criteria.
“These managers deliver alpha for their clients by employing stringent and well thought out investment processes,” said Liam Poole, chief operating officer at Allocator.com, in announcing the awards.
Glazer funds took top honors in three separate categories — including long-term performance.
As it was a Zoom event, there were no speeches or applause. But the quiet merger arb guy from upstate New York, it seems, is finally in the spotlight he’s avoided for the past three decades.
