Some things I read just mystify me.

FinancialNews-US.com reported on June 27 that former US Vice President Dan Quayle had joined the board of Heckmann Corp., which it described as a ‘blank check’ company. It continued:

‘Blank [check] companies, which have no defined business plan and are set up to buy an unspecified company or assets, have become increasingly popular in the last couple of years, but have been controversial because investors do not know what they are buying.’

Controversial?! A number of other words came to mind.

Bloomberg (Elizabeth Hester, ‘U.S. Vice President Quayle to Create Blank Check Firm’, June 26, 2007) which FinancialNews-US had cited, offered a bit more illumination. A “blank check company [is] also known as a special purpose acquisition company, or SPAC. Shares of the shell company are sold to the public to finance a merger or acquisition that the executives haven’t yet identified.’

Haven’t yet identified…. Then, what exactly are shareholders buying?

Heckmann, Bloomberg reports, plans to raise $500 million in the second-largest IPO for a SPAC. This year, SPACs have raised $4.1 billion in 33 IPOs. Last year, in the same period 22 SPAC IPOs raised $1.4 billion. FinancialNews-US noted: ‘Credit Suisse and Roth Capital Partners are leading Heckmann’s listing, and will be paid fees of up to $40.3m, or 7% of the float’s value, according to the company’s filing with the SEC.’

The good news is that the SEC, following a spate of frauds involving blank check companies in the late 1980s and 1990s, required such firms to put the money they raised in escrow until they completed an acquisition. So says Bloomberg.

Richard J. Heckmann, the company’s namesake, is Chair and CEO of K2, the sporting goods company, and founder of USFilter, now part of Vivendi. Besides Bush I’s Veep, Dan Quayle, Bloomberg reports another former Indianan will serve on Heckmann’s board: ex-Notre Dame football coach, Lou Holtz.

Now in a total US economy measured in 14 pre-decimal digits, a group of ventures measured only in 10 may not seem much to concern us. But it’s worth noting that the two Bear Stearns hedge funds everyone worried about crashing last week were in total about the same size as this year’s blank check IPOs.

The point is there’s a lot of money sloshing around in vehicles investors either don’t understand or can’t understand, because there’s nothing to understand. Hedge funds are essentially unregulated; no one forces them to report, so they don’t. Blank check companies have nothing to say, and they disclose they have nothing to say.

At a time when investors – individual and institutional – demand transparency from publicly traded companies (except it appears SPACs), their relative silence on these vehicles is mystifying.

There should be an outcry.