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Could giant SPACs be next?

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Re: Could giant SPACs be next?

#51

Post by mdorazio »

SomewhatLikely wrote: post #41
legym wrote: post #22

Been trading SPAC's recently. Seeing a huge influx of SPACs in renewable energy. Jump in at the beginning and the most you can lost is 10$ if the SPAC fails. When it receives a letter of intent(LOI) you'll see a big boost to the stock price. When the definitive agreement (DA) is announce there is another 20% jump. After the merge and symbol change, the price drops and then slowly comes up. With so many coming out, ju…

I thought you get your $10 back if there's no merger. Is this not the case?

OP's information is a bit sparse. A SPAC is a regular stock on the stock market and its share price is tied directly to the amount of money used to instantiate it in the first place. In general, you hold it for as long as you want and it will bounce around within a dollar of its baseline price. You can sell it at any point and get your money back. I can't really think of a scenario in which you would lose more than a few percentage points of your money without a lot of warning.

The downside of SPACs is that if they don't do a reverse merger they're unlikely to appreciate in value like a normal stock (or index), so you're basically gambling the opportunity cost against a chance of significant gain.

Re: Could giant SPACs be next?

#52

Post by stewbrew »

stewbrew wrote: post #31
legym wrote: post #22

Been trading SPAC's recently. Seeing a huge influx of SPACs in renewable energy. Jump in at the beginning and the most you can lost is 10$ if the SPAC fails. When it receives a letter of intent(LOI) you'll see a big boost to the stock price. When the definitive agreement (DA) is announce there is another 20% jump. After the merge and symbol change, the price drops and then slowly comes up. With so many coming out, ju…

I think this is a rather oversimplified view of SPACs. Matt Levine recently wrote a nice piece about the magic of SPACs. Here is a paper he cites: https://corpgov.law.harvard.edu/2020/11/19/a-sober-look-at-s...

Unfortunately I cannot edit my comment anymore: Here is the text by Levine: https://www.bloomberg.com/news/newsletters/2021-01-08/money-...

Re: Could giant SPACs be next?

#53

Post by swrj »

legym wrote: post #22

Been trading SPAC's recently. Seeing a huge influx of SPACs in renewable energy. Jump in at the beginning and the most you can lost is 10$ if the SPAC fails. When it receives a letter of intent(LOI) you'll see a big boost to the stock price. When the definitive agreement (DA) is announce there is another 20% jump. After the merge and symbol change, the price drops and then slowly comes up. With so many coming out, ju…

It's not $10 for every SPAC, different SPACs have different NAVs.

Re: Could giant SPACs be next?

#54

Post by naruvimama »

perardi wrote: post #42
naruvimama wrote: post #40

If you do not want to hold your money in the bank. Nor do you want to invest your money in artificially inflated stock. Coming out of the pandemic we are going to see a monumental shift in lifestyle and economics. It is that crisis that replaces old guards with new champions. SPACs had a bad reputation, but in the current circumstances seem pretty reasonable. I guess in terms of risk-benefits it is an intermediate be…

“Nor do you want to invest your money in artificially inflated stock.” How does a SPAC possibly help with that? One of the more notable SPACs was Nikola, which had effectively no revenue, and was very unstable. https://www.google.com/finance/quote/NKLA:NASDAQ?sa=X&ved=2a...

Isn't all stock valued on speculation.

I guess you would pick SPACs promoted by people you trust will make a good deal.

Re: Could giant SPACs be next?

#55

Post by gonehome »

perardi wrote: post #42
naruvimama wrote: post #40

If you do not want to hold your money in the bank. Nor do you want to invest your money in artificially inflated stock. Coming out of the pandemic we are going to see a monumental shift in lifestyle and economics. It is that crisis that replaces old guards with new champions. SPACs had a bad reputation, but in the current circumstances seem pretty reasonable. I guess in terms of risk-benefits it is an intermediate be…

“Nor do you want to invest your money in artificially inflated stock.” How does a SPAC possibly help with that? One of the more notable SPACs was Nikola, which had effectively no revenue, and was very unstable. https://www.google.com/finance/quote/NKLA:NASDAQ?sa=X&ved=2a...

Yeah - Nikola is fraud, I think it’ll go to zero it’s just hard to know when.

This is also the general problem I have with SPACs. The incentives are all wrong.

If you’re a founder and some SPAC approaches you wanting to merge to take you public it means they think they can get a deal from you. They promise price certainty over an “uncertain market”, but if they’re willing to make the deal it’s because they’re betting the market will be good to them.

Why would the founder take that?

They should do their own IPO then if that’s the case or they’re getting ripped off.

Unless their company is fraudulent bullshit in which case they might as well take the SPAC deal and then they can dump their position on the public (after hyping it up of course). Then you can buy your $33M ranch in Utah [0] and retire on the winnings from your successful con.

Founders and SPAC investors cash out rich and the public is left holding the bag.

At best the founder is lazy and doesn’t want to deal with the logistics of a direct listing or IPO and that doesn’t bode well for my impression of the founder either.

I won’t invest in a SPAC and my prediction is that companies that go public via a SPAC will underperform those that go public by other means (especially those that do a direct listing).

[0]: https://www.latimes.com/business/real-estate/story/2019-11-1...

Re: Could giant SPACs be next?

#56

Post by melomal »

gundmc wrote: post #5

What's driving the recent popularity explosion of SPACs? They've been around since at least the early 2000s, but total capital participating has risen nearly tenfold since 2014.

Follow the 'unicorn' startups and you will find all of the origin's for buzzwords.

SPACs have been around for a long time, also they were considered a junk method of going public due to the nature of SPACs. It's the fact that a few startups managed to IPO with solid results and now it's flavour of the month. It's madness to see and I learned a new word because of it 'cargo cult management'.

Re: Could giant SPACs be next?

#57

Post by namdnay »

Judgmentality wrote: post #6
gundmc wrote: post #5

What's driving the recent popularity explosion of SPACs? They've been around since at least the early 2000s, but total capital participating has risen nearly tenfold since 2014.

Speculative opinion - lack of regulations are increasingly appealing in an ever frothier market.

it's exactly that. there's more demand for IPOs than supply of them at the moment, so people are willing to invest in less well regulated options, such as SPACs (which are basically just a workaround the regulatory burden of IPO)

Re: Could giant SPACs be next?

#58

Post by TeMPOraL »

melomal wrote: post #56
gundmc wrote: post #5

What's driving the recent popularity explosion of SPACs? They've been around since at least the early 2000s, but total capital participating has risen nearly tenfold since 2014.

Follow the 'unicorn' startups and you will find all of the origin's for buzzwords. SPACs have been around for a long time, also they were considered a junk method of going public due to the nature of SPACs. It's the fact that a few startups managed to IPO with solid results and now it's flavour of the month. It's madness to see and I learned a new word because of it 'cargo cult management'.

> and I learned a new word because of it 'cargo cult management'

You're welcome :). Perhaps you can help me back and explain to me, what's up with SPACs this month? I've been hanging around startup circles for years now, and I've never noticed SPACs until some HN threads yesterday or two days ago. And now I see them everywhere. Did Matt Levine write about them recently or something?

Re: Could giant SPACs be next?

#59

Post by AznHisoka »

legym wrote: post #22

Been trading SPAC's recently. Seeing a huge influx of SPACs in renewable energy. Jump in at the beginning and the most you can lost is 10$ if the SPAC fails. When it receives a letter of intent(LOI) you'll see a big boost to the stock price. When the definitive agreement (DA) is announce there is another 20% jump. After the merge and symbol change, the price drops and then slowly comes up. With so many coming out, ju…

The most you can lose is $10? No matter how many shares you own? Or is that per share?

Re: Could giant SPACs be next?

#60

Post by plouffy »

SomewhatLikely wrote: post #41
legym wrote: post #22

Been trading SPAC's recently. Seeing a huge influx of SPACs in renewable energy. Jump in at the beginning and the most you can lost is 10$ if the SPAC fails. When it receives a letter of intent(LOI) you'll see a big boost to the stock price. When the definitive agreement (DA) is announce there is another 20% jump. After the merge and symbol change, the price drops and then slowly comes up. With so many coming out, ju…

I thought you get your $10 back if there's no merger. Is this not the case?

Yes. SPACS are not stocks, not sure what the other replier is talking about (they're SPVs).

If a SPAC doesn't find a company to merge with you get your money back and some interest. If a SPAC finds a company, you have the choice to (1) stay invested in the SPAC and therefore the company or (2) refuse the merger and get your money back with interest.

Interestingly when you invest in a SPAC you actually get two things (1) the option to invest in the company they find, and (2) a warrant to buy even more stock. What's even more interesting is that you could actually sell this warrant while keeping the option to invest in the company the SPAC finds.

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