Thank you all for the follows! 5K! Due to many new followers that may be new to SPACs, below is a mega thread to help with the basics, current environment, and other follows. I will pin this to my profile for this week if you want to share to anyone interested in SPACs.
SPAC timelines consist of these stages:
IPO – A SPAC raises cash and begins trading as a unit. The cash is placed in Trust
Searching – After IPO, the SPAC management team looks for a company to merge with. This is typically 24 months but can be shorter depending on the SPAC
IPO – A SPAC raises cash and begins trading as a unit. The cash is placed in Trust
Searching – After IPO, the SPAC management team looks for a company to merge with. This is typically 24 months but can be shorter depending on the SPAC
LOI/Rumor – A letter of intent is announced publicly or Bloomberg/Reuters etc. breaks news of a rumor that a SPAC is close to a deal with a target.
The LOI/rumor stage doesn't always happen, sometimes they go straight to a definitive agreement. Rumors should only be considered to have value if from a trusted news source, internet rumblings are pure speculation. During this stage, a deal can still fall apart and not be signed
Definitive agreement (DA) – deal officially inked. The SPAC begins filing paperwork with the SEC to have the merger approved to take the target company public. This process typically takes 3-4 months after the DA is announced.
The SPAC trades as a projection of the target company during this period. Each weekend, I update and pin to my profile the status of all SPACs with a DA and where they are in this SEC filing timeline.
Merger date – a date is set for a shareholder meeting to announce the results of the SPAC shareholder approval vote. Shareholders must vote to approve the deal or not before this date. The shareholder may also elect to redeem the net asset value (NAV) of the shares.
If a shareholder redeems, they vote to not hold through the merger + receive the cash value of their shares back. This feature creates a “floor” for a SPAC before the merger is complete. Poor deals face heavy redemptions and the target company receives less cash than expected.
Key terms with SPACs
Unit – A new SPAC IPO is in the form of a unit typically. This is denoted by a U on the end of a ticker. A unit consist of a share and a warrant (or fraction of one). The unit is broken out to the share and warrant 52 days after IPO typically.
Unit – A new SPAC IPO is in the form of a unit typically. This is denoted by a U on the end of a ticker. A unit consist of a share and a warrant (or fraction of one). The unit is broken out to the share and warrant 52 days after IPO typically.
Share – Voting shareholder. Each share has a floor at NAV.
Warrant – Terms vary by SPAC, the most common is that they convert 1 warrant to 1 share at a price of 11.5 and is good for 5 years after merger date. Ratios can vary greatly by SPAC so refer to the prospectus.
Warrant – Terms vary by SPAC, the most common is that they convert 1 warrant to 1 share at a price of 11.5 and is good for 5 years after merger date. Ratios can vary greatly by SPAC so refer to the prospectus.
The SPAC asset class exploded in 2020 to over 100B as interest has increased from both institutional and retail investors. Institutions use it for a low risk investment with potential upside. Retail investors are interested in growth stage companies coming public in hot sectors.
The rise of the SPAC retail investor has greatly increased the volatility of the asset class with large daily swings occurring on a regular basis. I urge all followers to do your research into the class and understand what you are buying.
SPAC Sponsors and management teams have continued to rise in quality. Sponsors receive shares in the deal which has continued to get scrutiny from media outlets. Certain deals put price targets that must be achieved for sponsors to receive the promote shares.
Retail investors are becoming more aware and researching deal makers and management teams. Is this the beginning of the rise of deal maker fame to retail investors? Trending yes, with @chamath leading the charge at promoting SPACs and their popularity.
A few accounts that I follow that offer different types of SPAC info:
@spac_insider – #1 in SPACs, great website with all news, data and regular interviews with SPAC targets
@SpacGuru – all things SPAC – news, DD, discussion
@spac_insider – #1 in SPACs, great website with all news, data and regular interviews with SPAC targets
@SpacGuru – all things SPAC – news, DD, discussion
@SPACtrack – runs spactrack.net, a full listing of active and completed SPACs, sortable by sector or stage
@spac_attack – quality analysis of SPAC targets and trades
@JulianKlymochko – SPAC news, arbitrage strategy and podcast that discusses SPACs regularly
@spac_attack – quality analysis of SPAC targets and trades
@JulianKlymochko – SPAC news, arbitrage strategy and podcast that discusses SPACs regularly
@Doc_Steve_Brule – pinned post offers various investment strategies and further information on various SPAC details
@stocktalkweekly – Detailed DD on certain SPAC targets
@Mindwalletbody – Target analysis and news
@stocktalkweekly – Detailed DD on certain SPAC targets
@Mindwalletbody – Target analysis and news
There is approx. 200 SPACs currently searching for a target, 50 with a DA and 60 in pre-IPO stage. Please remember to properly research targets as you would any investment and know how SPACs work. The floor is your friend when considering going long and managing risk.
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