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Monday, February 01, 2021

SPAC - A New Trend Invading Wallstreet

تم إعداد هذا المنشور من قبل سنشري للاستشارات

SPAC - A New Trend Invading Wallstreet
SPAC - A New Trend Invading Wallstreet
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The product and investment ideas do not consider the risk profile and financial position of the recipient and may not be suitable for everyone. Trading in financial markets and use of margin involves a significant risk of loss, which can exceed deposits. Please read the complete disclaimer carefully.

A special purpose acquisition company (SPAC) is a shell corporation that is public and acquires a private firm, thereby taking it public. It allows a private company to raise influx amount of capital in times of market inconsistency. SPACs became prevalent in 2020 due to extreme market volatility as a part of the global pandemic. There were 230 SPAC IPOs in 2020, 50% more than the cumulative SPAC IPOs over the past 4 years. The trend has become popular due to its transparent nature in comparison to conventional IPOs which include quiet periods. The high-profile board members and executives behind each SPAC are a major reason for the success of the blank check companies. The investments raised through SPACs for the year 2020 were $79.87 billion, exceeding the funds accumulated through IPOs by $2 billion, which itself is a significant achievement.

Potential SPACs to consider for 2021
Potential SPACs to consider for 2021
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CM Life Sciences (CMLF)

The blank check company was founded by Delaware corporation in September 2020. The firm was listed on NASDAQ for $10 per share and raised $385 million. CMLF is backed by affiliates of Casdin Capital and aims to target three major sub areas of the life science sector, namely: life sciences tools, synthetic biology, and diagnostics.

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Pershing Square Tontine Holdings (PSTH)

Pershing Square Tontine Holdings raised $4 billion for $20 per share in its IPO in June 2020. The value of a SPAC is based on its management team and Pershing Square has an impressive one. The CEO, Bill Ackman, used a shell company in 2014 to merge with Burger King and Tim Hortons, resulting in a 50% surge in the stock prices. PSTH was reported to merge with Airbnb last year, but the home rental company refused the offer.

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Burgundy Technology (BTAQ)

Led by the former CEO of Hewlett-Packard and Sap Se, Leo Apotheker, announced an IPO in August 2020 with a share price of $10. The shell company’s potential targets are in the field of technology or enterprise software. The word on the street for a potential merger between BTAQ and REE Auto is yet to be verified.

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Supernova Partners Acquisition Co Inc (SPNV)

The shell company IPO-ed in October 2020 and raised $350 million. The SPAC aims to target the technology sector that has potential to upscale its operations. The firm has been in recent headlines due rumors of a merger with Buzzfeed. The management team of SPNV adds more merit to the company since it includes Spencer Rascoff, the co-founder of Zillow Group.

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Falcon Capital Acquisition Corp. (FCAC)

Alan Mnuchin, the brother of former U.S. Treasury Secretary Steve Mnuchin is a veteran investment banker and the chairman and CEO of Falcon Capital Acquisition Corp. FCAC raised $345 million in in September 2020 during the IPO. The shell company is in talks to merge with a digital health startup: Sharecare Inc and take it public. Although the sources of the news remain confidential, it is more than just street whisper.

Data Source: Bloomberg

Arun Leslie John
Chief Market Analyst

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