Chamath Palihapitiya and other SPACs to watch

  • SPACs have been volatile in 2021, with frantic activity at the start of the year followed by a significant slowdown.
  • SPAC shares often skyrocket once a merger or acquisition is announced, generating significant returns for the retail investors who own the stock.
  • Insider caught up with 3 SPAC market experts, who shared their outlook for 2022.

The dark before

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The market made headlines last year, with more than 600 blank check companies listed on the stock exchange, up from 248 in 2020.

Almost half of them occurred in the first quarter, before a prolonged decline in activity. But there were glimmers of hope for a rebound in the fourth quarter after news of a potential “SPAC meme” merger between DWAC and Donald Trump’s new media startup brought retail investors back into the fray. space.

A SPAC, or Special Purpose Acquisition Company, raises money through an IPO and then aims to acquire or merge with another company. These blank check vehicles raised $96 billion in the first quarter of 2021 alone, according to the Harvard Business Review.

Early investment in the right SPAC can generate significant returns, as the company’s stock price will often skyrocket once a potential merger is announced. For example, Churchill Capital Corporation IV saw its shares soar 7% in a single day in July after shareholders approved SPAC’s merger with electric vehicle maker Lucid Motors.

“The market is moving fast, and it’s swinging between super hot and frosty feelings,” SPAC arbitrage investor Julian Klymochko, whose firm Accelerate Financial Technologies runs an actively managed SPAC ETF, told Insider in a recent interview. “It’s quite manic-depressive – you can go from a frenzy to a

bear market

very quickly.”

Insider asked Klymochko and two other SPAC experts about their expectations for 2022. Klymochko also shared 18 publicly traded blank check companies that could rise this year if they announce suitable acquisitions.

Investment outlook 2022

Klymochko said better trade execution could be an important theme for the SPAC market in 2022. One of the risks of investing in these vehicles is that they may not be able to find business appropriate to target – and after two years of listing on the stock exchange, these unsuccessful SPACs must return all their funds to investors.

“2022 has to be a year of execution — we have to see business combinations,” Klymochko told Insider. “If we don’t see high-quality mergers, all of this will have been for naught.”

Kristi Marvin, who founded the industry research firm SPAC Insider, fears SPACs could struggle this year if the sell-off in tech stocks continues. Blank check companies tend to see higher growth companies as attractive acquisition targets.

“The macro environment is weighing on the stock market as a whole,” she told Insider in a recent interview. “For SPACs, which tend to combine with growth or technology companies, this is going to be even more pronounced and burden an already overly competitive field.”

But Enrique Abeyta, an executive at famed investor Whitney Tilson, Empire Financial Research, shrugged off concerns about spinning from growth to value. He told Insider that the SPAC market struggles in the second half of 2021 created an opportunity for investors to “buy the dip” in blank check companies this year.

“Last year, the excitement flared up exceptionally, retail investors flooded in, and then the market went from boiling to cold very quickly,” Abeyta said. “But now SPACs are trading at incredible valuations because the SPAC brand itself is a bit tainted.”

PSPC to watch

“High-quality SPAC sponsors have a clear advantage – they have pipeline investors who will back them because of who they are, and that means they can have legitimate conversations with companies looking to sign up,” Abeyta added. “That’s why retail investors should look for household names.”

Marvin told Insider that these types of SPAC sponsors can often draw on significant experience during the difficult merger process, improving their ability to execute deals.

“If you’re buying a SPAC that hasn’t announced a deal yet, you want to do some due diligence with the sponsor team,” she said. “If a team was previously able to navigate the SPAC process, it will have an advantage over other teams.”

Klymochko agreed that it is crucial for retail investors to prioritize investing in blue chip SPAC sponsors. It highlighted 18 SPACs from four sponsors – Churchill Capital, FTAC Ventures, the Gores Group and Social Capital.

Churchill Capital featured in one of the major SPAC market stories last year when its fourth fund launched Lucid (LCID) in the market. Its current blank check offerings trade under the symbols CCV, CCVI and CCVII.

Industry veteran Betsy Z. Cohen has been sponsoring fintech SPACs since 2015. She is currently president of three blank check companies – FTAC Athena, FTAC Hera and FTAC Parnassus.

Private equity firm Gores has closed $36 billion in SPAC deals to date, including bringing 3D spatial data company Matterport and premium electric vehicle maker Polestar to market. It currently sponsors six SPACs – GSEV, GIIX, GTPA, GTPB, GGPI and GMII.

Social Capital founder Chamath Palihapitya is one of the most prominent names in the SPAC industry. IPOF, as SPAC to watch.

“Those are the four main sponsors that I had suggested,” he told Insider. “Top sponsors are always worth following, and these four have all been successful in the past and have multiple SPACs listed at the moment.”

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