This IPO Deserves a SPAC(E) in Your Portfolio
Special purpose acquisition companies (SPACs) are all the rage right now.
However, you must be careful which ones you invest in. Some are fly-by-night companies that were created to enrich the managers of the fund. Others are legitimate ventures, where the goal is for the manager to prosper with you.
A good example of the latter is DraftKings (Nasdaq: DKNG), a position that War Room members are in right now and making money with. DraftKings – as we have written about in these very pages – has a lock on the iGaming market, with the goal of letting you bet on almost anything from anywhere.
But that’s not what I am introducing you to today.
Yesterday, a new SPAC became public…
Before I get to it, here is a great explanation of a SPAC from Investopedia:
A special purpose acquisition company (SPAC) is a company with no commercial operations that is formed strictly to raise capital through an initial public offering (IPO) for the purpose of acquiring an existing company. Also known as “blank check companies,” SPACs have been around for decades. In recent years, they’ve gone mainstream, attracting big-name underwriters and investors and raising a record amount of IPO money in 2019.
Here are the key takeaways:
- A SPAC is formed to raise money through an initial public offering (IPO) to buy another company.
- At the time of its IPO, a SPAC has no existing business operations or even stated targets for acquisition.
- Investors in SPACs can range from well-known private equity funds to the public.
- SPACs have two years to complete an acquisition or will be required to return the funds to investors.
That said, Bill Ackman, hedge fund manager and CEO of Pershing Square, brought a SPAC public yesterday called Pershing Square Tontine Holdings, which trades on the New York Stock Exchange with the symbol PSTH.U or PSTHU. (You’ll need to check with your broker for the exact symbol used – and don’t mistake it for Pershing Square’s own stock.)
The SPAC went public at $20 with 200 million shares issued. The kicker is that the money raised, all $4 billion, goes into the SPAC and not some promoter’s pocket. And Pershing Square will invest between $1 billion to $3 billion more into the fund.
I like it when the manager has so much skin in the game and is not charging huge fees. The interests between all the parties are aligned!
But let’s not jump the gun. While the SPAC is now up and running, it still must find good investments, and that takes time. SPACs must find those investments within a two-year period, otherwise the money is supposed to be returned to the shareholders.
Action Plan: This “time” allows members to position themselves into this SPAC at the price they want. And that is exactly what they’re doing in The War Room right now.
So sign up for The War Room right now and join me to get all the details on how to buy this particular SPAC before it has the chance to hit pay dirt!
About Karim Rahemtulla
With more than 20 years of experience, Karim has mastered the subtle art of options trading. What we admire about him is his ability to score huge gains while minimizing the massive amount of risk that often comes with options. Beyond his expertise in options trading, he is also the author of the best-selling book Where in the World Should I Invest? He publishes weekly about smart speculation in his latest free e-letter, Trade of the Day.