None of my posts are investment advice and are just for my personal diary and entertainment, I am not a financial advisor, do you own research.
This is my sort of online diary thing, where I post my adventures in SPACS.
I started investing in US SPACs in mid-2020, as I was losing interest in the UK markets as they didn't move fast enough for my style of swing trading and the general lack of liquidity.
I have not done too bad in the last year and 90% of my swing trades have been performed within my ISA portfolio and spread betting with one or two options plays.
WHAT is a SPAC?
SPAC stands for Special Purpose Acquisition Company and as the name states it is a company which exists for the special and sole purpose of acquiring an existing private company through a reverse merger to take that company public. A SPAC is essentially a big pot of money, raised by its sponsors, with the intention of putting that money into a private company and turning it into a well-capitalized public company. Typically, in a merger a small company is swallowed by a larger one, in this “reverse merger” the larger private company is swallowed by the smaller public SPAC so that can now trade publicly.
Why SPAC?
The SPAC management team sells Units on the market, typically for a base price of $10 and then puts that money into a trust fund to hold until it merges with a private company. These Units later split into common shares and warrants (an instrument that allows you to purchase additional shares later at a set price).
Under the terms of a SPAC, if the SPAC never merges or you do not like the merger target that is chosen you can redeem your shares for their Net Asset Value (NAV) which is essentially the original $10 that were put into the pot for the unit plus interest and minus a few fees but essentially $10 for discussion purposes. One of the primary advantages then of SPAC investing is your limited downside. If you buy Units close to NAV when they first list, you essentially cannot lose money on your investment outside of some extreme case such as fraudulent activity by the sponsors.
What to Spot with a new SPAC?
The management team and their reputation and especially…
