Are Investors Making Money with SPACS?

SPACS or Special Purpose Acquisition Companies, have been the rage in recent years (despite the fact, they aren’t new).

The attractiveness of SPACS has to do with:

• An alternative (and simpler) way of taking a company public
• Makes it easier to raise capital
• Allows retail investors to buy the company’s IPO

One of my favourite financial commenters, Grit Capital, takes a look at the question “Who makes money from SPACS?” – the answer might surprise you:

• Grit Capital has found that retail investors get the short-end of the stick, as recent SPACS have immediately fallen after the IPO
• The one who make the money in the deal is the “sponsor”. The “sponsor” manages the SPAC and invests very little capital but gets 20% of the SPAC equity.

So, it doesn’t really pay to be a retail SPAC investor, it’s the “sponsor” of the SPAC that gets the most benefit.

[Read on for the full explanation here]

If you have a team that wants to know the ins and outs of SPACS, reach out to us for one of our Instructors to deconstruct & explain SPACS to your team (available via virtual/online delivery).