Hi,
I recently got to learn about SPACs, and it seems pretty appealing and might even bring some big return when the deal goes well. Since I've never had any hands-on experience with this type of investment, (I barely started investing in stocks and etfs) what would be your suggestion as for picking "the right one" and expected strategy, etc?
Thanks!
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This is definitely a market top signal
Most SuperPACs are private and thus you can't invest in them. Sorry
He is talking about Special Purpose Acquisition Companies, not SuperPacs.
https://www.investopedia.com/terms/s/spac.asp
It was a joke answer lol
SPACs are commonly referred to as "blank check companies" meaning that you are essentially writing a check for the SPAC to then go and buy a company. You have no ability to diligence the acquisition they make and there is a moral hazard as they are incentivized to spend every last dollar allocated before the investment period expires or they'll have to return funds. The economics are also heavily weighted in their favor vs. yours. On top of that, SPACs are a buyer of last resort for sellers and their brokers. SPACs don't get the pick of the liter in terms of sellside deals. In short, if you're a retail investor, run.
Thank you for the reply!
As mentioned above, you're limited in diligence. You're basically choosing a high conviction manager and hoping that they choose a good target. If you like Bill Ackman, check out Pershing Square Tontine Holdings. He also has a unique setup with regard to the economics that is worth considering.
The last part is not really true. The best SPAC sponsors (in tech, it's probably Dragoneer, Chamath, Altimeter) are definitely seen as a viable alternative to a traditional IPO. As someone who has worked on SPACs, I can tell you the amount of inbounds from good companies that the top tech sponsors get is insane. Companies that you've heard of that have gone public through the traditional IPO route at least had conversations with them (depending on size). It's an increasingly popular route for higher and higher quality companies to explore; far from being "a last resort".
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