How equity became more attractive than debt

The prime example of something highly improbable that became conventional wisdom: The idea that both interest rates and inflation will remain near zero for well over a decade.

Why it matters: As Axios' Dan Primack writes, private equity firms (the polite rebranding of "leveraged buyouts") have historically bought companies and loaded them up with debt.

• Now, they're starting SPACs, filled with fresh equity capital, with the intent of taking companies public. "The acquisition part is the same," says Dan, "but the transaction financing is inverted."

The big picture: Normally, debt is cheaper than equity, because it is tax-advantaged. In 2005, for instance, the effective tax rate on equity financing was 36%, while the effective tax rate on debt financing was negative 6.4%.

• What's changed is that interest rates have become so low that tax-deductible debt service expenses aren't big enough to generate much of a tax savings. Simultaneously, stock prices are so high that raising equity capital has never been cheaper.

The bottom line: SPACs are less work for private equity companies: Rather than own and operate a company, they will often just take a board seat. But they will still see enormous upside if the deal works out.

• SPACs also come with less accountability. There are no deep-pocketed limited partners asking awkward questions, just public shareholders who can come and go as they please.