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A Sober Look at SPACs (2020)

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Re: A Sober Look at SPACs (2020)

#51

Post by vtantia »

andylei wrote: post #47
vtantia wrote: post #36

Earlier quoted context omitted.

Look at the comments below which mention 1 bullet point and do not look holistically at the problem and the solution. I have been finding this to be the case on a lot of HN comments recently I do not claim to be making an impartial analysis myself. Just putting out some points which have been omitted by the Wall Street-funded academic paper

> by the Wall Street-funded academic paper citation needed

Good point. Unfortunately, I couldn't find where their funding comes from from a quick cursory search (and I don't just mean the funding for graduate students, or salaries). If anyone could provide details about this, I would much appreciate it

Re: A Sober Look at SPACs (2020)

#52

Post by HNfriend234 »

I invest in SPACs regularly and have made a killing off investing in them. Plain and simple, SPACs are all about hype in terms of how much hype the target company can garner. I only buy pre-LOI SPACs and then consider selling them on the merger announcement or right before the merger completes.

This strategy works because of social media. People go around social media to hype up the company so to a certain extent it is a giant pump and dump scheme but the pumping is done by the collective internet communities on social media.

Typical aspects of the company don't matter. What matters is being able to hype the company. That's why stuff like electric vehicle makers, fintech and clean energy is stuff that everyone focuses on. Right now the average joe strongly believes that electric cars and clean energy are the future so they're more likely to buy into these SPAC companies because they're sold as "the next big thing" even though the reality could be that they're very risky but no one cares about that long-term because we all dump the SPAC shares before the merger completes anyways.

Re: A Sober Look at SPACs (2020)

#53

Post by mikeyouse »

jtdev wrote: post #38
thefreeman wrote: post #30

Earlier quoted context omitted.

cmon man. it's been explained countless times how short interest could be over 100% without anyone short selling shares that don't exist. if you still don't understand it you are essentially hiding your head in the sand to try to deny reality.

I'd love to see where this has been explained. I've not seen this anywhere.

One such example:

https://www.fool.com/investing/2021/01/28/yes-a-stock-can-ha...

> As an example, take a situation involving four investors. Annie owns shares of GameStop, and Annie and her broker have an agreement that allows the broker to lend Annie's shares to short-sellers. It lends them to Bob, who subsequently sells those borrowed shares short in hopes that GameStop's share price will fall.

> An investor named Chris ends up buying those borrowed shares from Bob. However, Chris has no way of knowing that those shares have been borrowed from Annie. To Chris, they're just like any other shares.

> More importantly, if Chris has the same kind of agreement, then Chris's broker can lend out those shares to yet another investor. Diane, another GameStop bear, can borrow those shares and sell them short.

> In this example, the same shares end up getting borrowed and sold twice. The short interest volume these transactions add to the total is twice the number of shares actually involved. You can therefore see that if this happened throughout the market, total short interest would eventually exceed the number of shares outstanding and approach 200%.

Re: A Sober Look at SPACs (2020)

#54

Post by ashika »

HNfriend234 wrote: post #52

I invest in SPACs regularly and have made a killing off investing in them. Plain and simple, SPACs are all about hype in terms of how much hype the target company can garner. I only buy pre-LOI SPACs and then consider selling them on the merger announcement or right before the merger completes. This strategy works because of social media. People go around social media to hype up the company so to a certain extent it…

>but no one cares about that long-term

indeed. and i congratulate you on your recent success in predicting the tastes of others who buy equities based on speculative price action. spac management likely makes their decisions largely focused on share price, which i suppose as an equity investor would feel like they have your back. but when you consider the role equity is meant to play in corporate finance, you would concede that in an ideal world management would not pay attention to share price at all, they would be working on making the most money possible using the assets and equity they already had, and then either returning or reinvesting those profits. the equity markets will always have a chaotic bent in the short term, so we should be careful of the ways we let them influence policy. its really a circular dependency if you think about it.

Re: A Sober Look at SPACs (2020)

#55

Post by goat_whisperer »

vtantia wrote: post #31

Whenever you have some instrument attacking Wall Street (in this case, the IPO itself), papers come out trying to protect them. This does not mention drawbacks of the IPO the SPAC is getting rid of - the 6-7% investment banking fee, the hassle of doing several roadshows, the near 100% IPO pop due to which the company raises half of what it would have (amounting to a 50% fee so to say which goes into the pockets of in…

>An impartial cost-benefit analysis needs to be done which is sadly impossible for someone whose funding comes from the deep pockets of Wall Street and institutional investors.

The link is to an academic paper that literally performs an impartial cost-benefit analysis of SPACs based on publicly available information, and concludes that the way SPACs are currently structured are a pretty crap deal apart from those who are able to get in early.

You mention underwriting fees, and the paper makes a big emphasis to emphasize the implicit costs of SPACs (i.e. all of the dilution) that people ignore.

Also, I'm not sure where the idea comes that SPACs are 'anti-wall street'. The sponsors and investors are some of the largest Wall Street Institutions out there (large Hedge Funds)

However, there are different ways of doing SPACs and the paper mentions a recent SPAC that gets rid of some of the excesses that end up screwing over the post-merger investors

Re: A Sober Look at SPACs (2020)

#56

Post by dontreact »

HNfriend234 wrote: post #52

I invest in SPACs regularly and have made a killing off investing in them. Plain and simple, SPACs are all about hype in terms of how much hype the target company can garner. I only buy pre-LOI SPACs and then consider selling them on the merger announcement or right before the merger completes. This strategy works because of social media. People go around social media to hype up the company so to a certain extent it…

Dumb question: how do you decide which SPACs to buy if it's before the LOI and you can't figure out what company they will be hyping?

Re: A Sober Look at SPACs (2020)

#57

Post by dasm »

HNfriend234 wrote: post #52

I invest in SPACs regularly and have made a killing off investing in them. Plain and simple, SPACs are all about hype in terms of how much hype the target company can garner. I only buy pre-LOI SPACs and then consider selling them on the merger announcement or right before the merger completes. This strategy works because of social media. People go around social media to hype up the company so to a certain extent it…

Effective strategy. It seems your edge comes from 1. learning about SPACs early and 2. identifying which ones will be successful. How do you get #1?

Re: A Sober Look at SPACs (2020)

#58

Post by whymsicalburito »

HNfriend234 wrote: post #52

I invest in SPACs regularly and have made a killing off investing in them. Plain and simple, SPACs are all about hype in terms of how much hype the target company can garner. I only buy pre-LOI SPACs and then consider selling them on the merger announcement or right before the merger completes. This strategy works because of social media. People go around social media to hype up the company so to a certain extent it…

Do you have any tips on good screeners or places to find these SPACs? I've never invested in them yet and don't know too much about them. Are they traded just like regular stocks?

Re: A Sober Look at SPACs (2020)

#59

Post by dasm »

ashika wrote: post #54
HNfriend234 wrote: post #52

I invest in SPACs regularly and have made a killing off investing in them. Plain and simple, SPACs are all about hype in terms of how much hype the target company can garner. I only buy pre-LOI SPACs and then consider selling them on the merger announcement or right before the merger completes. This strategy works because of social media. People go around social media to hype up the company so to a certain extent it…

>but no one cares about that long-term indeed. and i congratulate you on your recent success in predicting the tastes of others who buy equities based on speculative price action. spac management likely makes their decisions largely focused on share price, which i suppose as an equity investor would feel like they have your back. but when you consider the role equity is meant to play in corporate finance, you would c…

It seems you are implying that this sort of arrangement is fundamentally unhealthy for a market focused on accurate price discovery, and I think that's trivially true.

Some investing incentives are aligned with accurate price discovery, some are not (warren buffet vs a pump and dump).

Re: A Sober Look at SPACs (2020)

#60

Post by icedchai »

whymsicalburito wrote: post #58
HNfriend234 wrote: post #52

I invest in SPACs regularly and have made a killing off investing in them. Plain and simple, SPACs are all about hype in terms of how much hype the target company can garner. I only buy pre-LOI SPACs and then consider selling them on the merger announcement or right before the merger completes. This strategy works because of social media. People go around social media to hype up the company so to a certain extent it…

Do you have any tips on good screeners or places to find these SPACs? I've never invested in them yet and don't know too much about them. Are they traded just like regular stocks?

A SPAC is just a stock like any other. If you look for investor videos on YouTube, you'll find the same SPACs being pumped, both in pre-merger and post-merger form. There is also a SPAC ETF ("SPAK") that holds a bunch of them.
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