What the SPAC? 💸
Understanding the little-known IPO 2.0
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Today’s post is the first of a two part series on special purpose acquisition companies (SPACs).
(Update on 7/15: I am extending the series. Lots of cool stuff here!)
It began unexpectedly.
Not anticipating something so prophetic from this subreddit, I was immediately skeptical.
I had no idea what the author was talking about. The stock he referred to isn’t a traditional stock. This company doesn’t have any employees nor does it sell any products.
The company he referred to is considered a Special Purpose Acquisition Company (aka a SPAC).
What’s a SPAC?
In short, a SPAC is a publicly listed pool of money. They are a ‘blank-check’ that aims to merge with or acquire (M&A) a traditional company within 18 to 24 months.
First, the SPAC goes public (through an IPO) and then it decides what company to buy. Some SPACs have an industry or geographic focus, while others have free rein.
Tomorrow, we’ll get into why SPACs operate this way.
What SPACs should you know about?
Funny enough, Witty favorite Chamath is considered the SPAC revivalist in tech investing circles.
In September 2017, he raised $600M for his SPAC (ticker: IPOA), with the intention of bringing a fast growing technology company public. In October 2019, IPOA merged with space tourism company Virgin Galactic. Shares now trade under the ticker symbol SPCE.
The SPAC world is full of speculation and evolves daily. Here are the three most interesting ones to watch:
Yesterday, Fisker announced it’ll go public following a merger with Apollo Global Management’s SPAC (ticker: SPAQ).
Chamath has two SPACs on the market. In April he announced IPOB and IPOC. Both are looking to M&A a tech business. IPOB is focused on businesses within the US, while IPOC is focused globally.
NYSE 🏛 @NYSEToday marks the second IPO from @chamath's Social Capital this month, and their 3rd overall: 9/14/17: Social Capital I 4/22/20: Social Capital III 4/28/20: Social Capital II
Pershing Square Management
Bill Ackman, the controversial hedge fund manager, recently announced the biggest SPAC ever. His firm, Pershing Square Management plans to publicly list a $4 billion SPAC. Before this, the largest SPAC raised $1.1 billion.
Why should you care about SPACs?
The credibility flowing into the space shows SPACs are here to stay (and the WSB poster was onto something…).
From March through May of this year, more SPAC IPOs happened than traditional ones.
As a technology investor, you should get familiar with SPACs. Why? Simply:
SPACs allow long term tech cos go public earlier
SPACs allow access to higher risk, higher reward opportunities than what’s out there today
When Virgin Galactic went public, their CEO, George Whitesides, explained it best:
“For the first time, anyone will have the opportunity to invest in a human spaceflight company that is transforming the market.”
At the end of the day, SPACs are the new rocket ships that launch our meme stock dreams. Watch out Elon.
Tomorrow we are going to get into the details of SPACs. Specifically:
How does a SPAC work?
Why are SPACs becoming mainstream?
What else do we need to know?
See you tomorrow
If you made it this far - what did you think of this post? Did you care about learning about SPACs? If yes, what did you like? If not, what would you rather hear about? Feel free to reply to this email.
Note: This content is for informational purposes only. It should not be relied upon as legal, business, investment, or tax advice. Your use of the information contained here is at your own risk.