Valuentum Exclusive Analysis for the Discerning Investor

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Apr 13, 2021

SPACs Are Good for Markets, Not SPAC-tacular for Investors
Image: Performance of the Defiance NextGen SPAC IPO ETF (SPAK), where “a 60% weighting is applied to IPO companies derived from SPACs and 40% is allocated to common stock of newly listed Special Purpose Acquisition Companies (“SPACs”), ex-warrants” has been roughly flat since inception in October 2020. According to some estimates, there were 248 Special Purpose Acquisition Companies (SPAC) that went public in 2020, raising more than $80 billion (up sixfold from a record high set in 2019). SPACs reached heightened levels of excitement in early February, but the performance of the Defiance NextGen SPAC IPO ETF (SPAK) has been roughly flat since it began trading October 2020. Most of what investors have to go on when considering a SPAC is a thorough assessment of the management team, as SPACs go public as a shell (“blank check”) company with no underlying operating business. Some forward-leaning, “out of the box” management teams may be worth rolling the dice on, but for the most part, the great many of the SPACs out there probably aren’t worth your time. Though we like the idea of more investor choice once SPACs take operations public (and new companies are listed), we’re not getting lured into the SPAC IPO boom. It’s not our style. Even diversified exposure to the SPAK ETF doesn’t sound great. We’ll be patient and evaluate the companies SPACs bring public through traditional equity analysis to see if opportunities present themselves. Prudence and care, first, always.