4 SPACs to Invest in
If you follow Wall Street and any financial media, you’ve probably heard about SPACs or blank-check companies. For starters, a Special Purpose Acquisition Company (SPAC) is a publicly-traded firm that exists solely to merge with a private company. While the concept of SPACs has always been there, it became popular in 2020 amid the global pandemic. In total, the companies raised more than $73 billion from investors, and the trend is continuing this year.
How SPACs work
In general, the process of taking a company public through an Initial Public Offering (IPO) tends to be long and expensive. Therefore, more private companies are considering alternative ways of being public. One of the options is known as a direct listing, where a company’s shareholders sell their stock to public investors directly. It was used by companies like Asana and Spotify.
SPACs are another alternative method that has become popular these days. In general, the process starts when a prominent person or company decides to launch a blank-check company. After incorporating, they fundraise and then list with either the Nasdaq or the New York Stock Exchange (NYSE). After doing this, they start searching for a private company to merge with. After merging, the public company can now change its name to reflect the acquired company.
In the past few months, some of the biggest names in the corporate world have launched or announced plans of launching their SPACS. For example, Masayoshi Son of Softbank is starting a $525 million SPAC. Also, Chamath Palihapitiya has started and launched about 6 SPACs. Also, Bill Ackman, the famous hedge fund manager, has raised the biggest SPAC in the world, worth about $4 billion. So, let’s look at the best SPACs to invest in today.
Pershing Square Tontine Holdings (PSTH)
Bill Ackman is a famous hedge fund manager who runs a company called Pershing Square Capital Holdings that has more than $13 billion of assets under management. He also runs Pershing Square Holdings, a company that is a member of the FTSE 100 in the UK. Bill is well-known for his past mistakes, including his bet on Valeant Pharmaceuticals and his short against Herbalife.
However, in the past two years, he has redeemed his career. In 2019, his hedge fund gained about 58%, and last year, he rose by more than 70%. This made him one of the best-performing managers.
Bill raised about $4 billion for his SPAC that is known as the Pershing Square Tontine Holdings. A few months after raising the fund, he is yet to find a company to merge with. Some have suggested that he will possibly take Michael Bloomberg’s Bloomberg company public.
At the time of writing, Tontine’s stock has risen to $26 valuing the firm at about $5.2 billion. Because of his Wall Street credentials, I believe that the stock will shoot higher.
PSTH vs. S&P 500
FTAC Olympus Acquisition Corp (FTAC)
Betsy Cohen is one of the leading women in finance. She started her career by starting the Jefferson Bank at the age of 32. She then sold the company and started Bancorp, a large banking company that processes more than $20 billion every month.
In 2020, Betsy Cohen became the most high-profile woman to launch a SPAC, which she named FTAC Olympus Acquisition Corp. The blank-check company raised more than $755 million in 2020 and is now raising another fund.
According to media reports, the fund is planning to merge with Payoneer. For starters, Payoneer is a fintech company that enables people and companies to send money around the world.
The company is used by leading firms like Fiverr, Lazada, Airbnb, and Getty to send money to their partners around the world. The company, which is said to be profitable, is used by millions of people globally.
Therefore, you should invest in FTAC because of the credibility of Betsy Cohen and the rising demand for fintech products like those offered by Payoneer.
FTAC vs. S&P 500
Opendoor Technologies (OPEN)
Opendoor is a large American startup whose goal is to disrupt the real estate industry. Through its mobile apps and website, one can easily sell their home and save the commission. You can also sell your home directly to Opendoor.
The company will then repair the home and sell it for a profit. The flipping business is also being used by other large companies like Zillow and Realtor.com. Opendoor also has a marketplace where people can buy and sell homes.
Early in 2021, the company went public by merging with a SPAC sponsored by Chamath Palihapitiya. The company makes a good investment because of its unique model in the real estate market. It also has a substantial market share in the United States and has more room to grow abroad. The chart below shows the performance of the SPAC against the S&P 500.
Opendoor vs. S&P 500
TPG Pace Beneficial Finance (TPGY)
TPG is one of the leading players in the private equity industry. The company has more than $85 billion of assets under management (AUM). It is a well-known player that has invested in leading companies like Airbnb, Avidia, Chobani, Everfi, Spotify, and Uber.
In 2020, the company launched the TPG Pace Beneficial Finance SPAC and raised about $450 million. The company then acquired EVBox, a company that supplies smart charging solutions to electric vehicles. It owns the biggest charging infrastructure in Europe.
You should invest in TPG Pace because of its decades of experience in the industry and the strong demand for electric vehicles and charging networks. Also, the industry has substantial room to grow around the world.
TPGY vs. S&P 500
SPACs have done well for investors in the past year, and the trend is not going to stop any time soon. Therefore, while not all SPACs are worth your time, we believe that the four mentioned here have a bright future. You should always do your due diligence before you invest in these SPACs, though. Also, you can invest in one of the two public SPAC ETFs like The SPAC and New Issue ETF (SPCX) and Defiance NextGen SPAC IPO ETF (SPAK).