Just creating a thread for SPAC investing. Some folks wonder if they would not be richer if they had access to investing in pre-IPO hyper-growth companies and in special situations. So, let us discuss how to access these markets through SPACs and which SPACs folks in this forum are investing in.
As a starter, Yogi's Barron's summary from a couple of days ago included the following:
ETFs of SPACs, “wrappers” for “blank-check/shell” companies. 250 SPACs raised $83 billion in 2020, and 2021 is already half there. Indexed ETF SPAK has 40% in pre-merger-SPACs and 60% in post-merger/IPO companies. Active ETF SPCX is 100% in pre-merger SPACs, and active SPXZ has 33% in pre-merger SPACs and 67% in post-merger/IPO companies. SPAC holders get into related IPOs at IPO prices, just like big institutions, while retail customers have to buy IPOs in the secondary market."
Interesting discussion above. Of note - mentioned in the video SPACs have not performed as well as IPOs even though SPACs are a backdoor way to do an IPO.
The entire concept just reminds me of the Pink Sheets traded Shell Companies I lost money on 20-25 years ago. Just an observation - not necessarily what is going on here. I do admit that purchasing these via the ETF route makes me feel better about the idea. I would opt for an actively managed ETF personally.
M* provides indicated IV for ETFs from which current premium/discount can be deduced. But M* doesn't provide IV for SPAK, SPCX, SPXZ.
One can use previous day's NAV [as is done for CEFs] but that is not ideal.
Basically, if creation/redemption processes for ETFs don't work well, or are disrupted, ETFs may trade at CEF like premium/discounts.
yogibearbull I've had more time to dig into SPCX. The vast majority of its holdings, over 99%, are all trading on an exchange. It will be the trading companies that it holds that will be holding the yet to be listed companies. That should make the creation unit issue much more viable. Of course that makes the DD a bit more challenging sinceit owns over 70 positions - LOL. I think I will look at those postions exceeding 2% of the portfolio. That pares down the list to just 11 listed companies to review. The Advisor is actively managing this thing. I really want to know more about the Advisor. That will probably be more informational than the positions held by this EFT. Very little history to this EFT as it was formed in 12/2020.
javajoe thanks for the article. It just seemed like the latest gimmick to me; but, for some reason I was interested. What was really telling was the last paragraph of the article:
"Under the rules governing them, SPACs must identify firms they can merge with within 24 months after they have raised their funds or they will be wound up and the IPO proceeds returned to investors. More than 300 SPACs need to pull that off this year or risk being liquidated. But with only so many quality targets to go round, and SPAC founders’ strong incentive to close deals — even at the expense of shareholder value — SPACs may well end up in a negative spiral of poor quality/bad press/tighter regulation. And we know how that ended for reverse mergers"
I think I will reinvest my dividends from where the came from for the time being. I lost enough money on the reverse merger gimmick of the 2000-2005 era to last for a lifetime.