Are Investors Making Money with SPACS?

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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).

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