What Are SPACs and Should You Invest in Them?
Money For the Rest of Us
J. David Stein
4.5 • 1.4K Ratings
🗓️ 21 October 2020
⏱️ 27 minutes
🧾️ Download transcript
Summary
How special purpose acquisition companies work, what their performance has been and what are the ways to invest.
Topics covered include:
- How much money has been raised in SPAC initial public offerings and who are some of the better known sponsors
- What are the benefits of a SPAC acquisition compared to a traditional initial public offering
- How SPACs work from the initial IPO to the acquisition of a private company
- How have SPACs performed so poorly
- How a new SPAC ETF is structured
- An intriguing way to invest in SPACs that potentially could outperform
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Transcript
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| 0:00.0 | Welcome to Money for the rest of us. This is a personal finance show on money, how it works, how to invest it, how to live without worrying about it. |
| 0:10.0 | I'm your host, David Stein today's episode 318. It's titled, What Are Spacks and |
| 0:17.2 | should you invest in them? Recently on the Money for the Rest of Us Plus member forums we've had an ongoing discussion on SPACS. |
| 0:27.0 | SPACS is an acronym for Special Purpose Acquisition Companies. |
| 0:32.4 | These are non-operating publicly listed companies, sometimes called |
| 0:37.3 | blank check companies whose purpose is to identify and purchase a private company, allowing that private company to be publicly |
| 0:45.8 | listed. |
| 0:46.8 | They are extremely popular right now. |
| 0:50.1 | In 2020, so far, there have been over $53 billion in the US raised in SPAC initial public offerings, |
| 1:00.4 | according to Deal Logic. |
| 1:03.0 | In other words, a new special purpose acquisition company is created. |
| 1:09.0 | Their shares are made public with the idea of eventually purchasing a private company and helping that company go public and have publicly traded stock that trades on a stock exchange. |
| 1:21.0 | If we combine the amount raised in 2019 and 2020 with, again, $53 billion |
| 1:27.7 | raised in 2020, combined there have been more raised in SPAC IPOs since 2003. So effectively more raised in the past |
| 1:38.8 | two years than the prior 16 years combined. |
| 1:43.0 | Spacks are getting bigger. |
| 1:45.0 | The average Spack IPO brought in $379 million in 2020 versus $231 million last year, according to SPAC Insider. |
| 1:57.0 | There have been a number of prominent individuals that have gotten involved in SPACs. For example, former NBA basketball legend |
| 2:06.5 | Shaquille O'Neill, along with three former Disney executives and one of Martin Luther King |
| 2:11.6 | Jr. sons, are planning on launching a SPAC that targets |
| 2:17.3 | technology and media companies. |
| 2:20.0 | It's a SHAC SPAC. |
... |
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