In the recent market place their has been a common word going around on CNBC, with your friends, or in the barber shop about SPACs but whats this talk about? A SPAC is a Special Purpose Acquisition Company other wards known as a blank check company, an institution(big buck investors pooling their capital) setting out to find a solid investment/company to merge with. This allows retail investors to get in new publicly traded companies at the same time institutions do instead of the traditional IPO process. This approach lets creation of new publicly traded companies in a cheaper, and faster fashion for the business and a venture capital approach to retail investors.
These SPAC deals may offer more risk as mergers are not definite deals they may fall through if there is an issue between the two mergers. These problems may arise when investors and the business are not on the same page. Some of these deals may fall through but SPAC companies have about two years to form a deal or the proceeds go back to the individual investors. These blank check companies/SPACs may fall through on a original deal and close another with a different company. These blank check companies are looking for opportunity with growth and a long time horizon in a business that has the same values as the pooled up investors forming the SPAC. Pre merger these companies start trading at about 10 dollars and start to obtain more volume very close to the merger along with a big sell off from traders taking there gains. This can be a great opportunity to play a trade but at the end of the day the most money is made from a buy and hold approach. Entering the investment pre merger can offer much reward with a mispriced bet and offer a worth while R/R