SPACs Explained (and Why You Might Want to Avoid Them)
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- Опубликовано: 3 дек 2020
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SPACs have been popping up left, right and centre, but are they worth all the hype? We explain the investment vehicle, and why you might want to avoid it, on today's episode.
Intro Music: Marty Gots a Plan by Kevin MacLeod
Title Music: www.bensound.com/royalty-free...
Host/Editor: Richard Coffin
Producer: Craig Lord
This video is sponsored by NOA
DISCLAIMER:
This channel is for education purposes only and is not affiliated with any financial institution, although Richard does work as an employee for an investment manager. Richard Coffin is not registered to provide investment advice and as such does not provide recommendations on The Plain Bagel - those looking for investment advice should seek out a registered professional. Richard is not responsible for investment actions taken by viewers.
The first 100 people to use this link (or use coupon code BAGEL50) will get a free week of Noa's premium subscription, plus 50% the annual fee: www.newsoveraudio.com/bagel
My cat has started to vomit an unusual amount of hair balls. I’m thinking about taking their sale public at a 40 billion dollar valuation. Invest now before it’s too late.
say less, I'm in!
I'll go with an IPO. Your thing sounds like a SPAC.
tell your cat to stop spac ing
I am his cat n let me tell u there r no hair balls like mine anywhere else on the market
You're not Bill Ackman
Thank You. I have been hearing about SPACs for months, but no one else has explained it clearly.
Great video! I did my Business Law Research paper on this earlier this month. Spot on according to my research. The biggest problems really are the sponsors taking up too many shares and companies with non-transparent finances being taken public
aren't those two things, uh, the only reasons for the sponsors or companies to use a spac instead of IPO or direct listing?
"The PB"
Keep it. No kidding. It surprisingly has a ring to it. Bass-y.
Is his son named Jay? Then we can have PB&J.
"Without paying a fortune to those investment bankers"
Bruh!
Got em
@@ThePlainBagel lmao
Banks make more on fees from SPACs.
Thank you for your analysis bro! I watched handful of videos prior, but this one made most sense.
A "SPAC man" is an investor or manager not to be confused with the circular character that eats white dots, cherries, and occasionally ghosts
Your videos are so helpful! Thank you so much for making such awesome content.
Every other RUclipsr: Why SPACs will make you rich!
Richard: Why You Might Want to Avoid SPACs.
I wonder who I should listen to😅
@Luís Andrade Haha
I think to logical thinking
Don't just do what either of them say, make ur own conclusions research and gain experience
Don't fomo a spac and you'll be fine.
@Luís Andrade if u like simple then maybe blue chips and index funds are more suited for you
"In God We Trust. Everyone else must pay cash."
"How soon can you get me the money?"
Helpful video! Thanks for the breakdown of SPACs.
Now do “direct listings”!
Can you say more about what this is?
@@davebean2886 A Direct Listing is when a company brokers it's own IPO without an investment bank or joining a public company, allowing their shareholders to sell their shares publicly.
A company does this when they want to go public and doesn't need a cash offer or guarantee that comes from investment banks buying shares like on normal IPO's, or from SPAC's buying a portion of the company like on spac IPO's.
A direct listing is not guaranteed to make any money, and stock pricing is based on demand, so only known companies should do this. A direct listing saves a company's shares and money, but is harder to sell unless the company is popular.
@@princeoij Thanks for the explanation - seems like a more straight forward way to go public.
can you make a five minute history lesson on the 1987 financial crisis?
I'd take a SPAC merging with a great company @10$ over any overpriced IPO like AirBnB
FACTS
Depends. Seeking alpha makes a reasonable case for $700 price
that is the smart thing to do. I believe SPACs are good because a portfolio will and should need growth. Especially when you have little money to start with.
Those who are bashing SPACs are free to be wrong. CCIV to the moon.
I mean depends on the SPAC and the company I guess , but you could also just invest in a more reasonable company. No one is making you invest in AirBnB :P.
If the SPAC is nikola and the company is general motors whose respective synergies are paying art student to design vehicles , shoving truck downhill and filming it, and having a relatively mediocre car brand that has been underperforming compared to many of its competitors then I feel bad for you. Give me an overpriced IPO company which at least has a future in its respective industry over those any day.
If the SPAC is something endorsed by Chamath thoug then at least it has more credibility than nikola ever did and may actually succeed ... again the opposite of nikola in every way :P .
Now I know what spac is. You get my subscription. Thank you.
I saw 3 videos and yours was the only one I understood. Thanks!
Hey Richard, can you make a video about how to detect fraudulent annual report (balance sheet, income statement etc) thanks
+1
Hey! You should check out Security Analysis by Benjamin Graham (book, or the Swedish Investor YT channel too).
@@jamesgreen4212 yep i have just read about fraudulent income account haha i believe it was around chap 5
Google REFCO. That’s all you need to know.
good to hear the other side of the story - one which not usually covered by stock youtubers
Nice easy explanation of SPACs as well as a promising curated news service. Looking forward to using NOA.
Buy into SPACs early and as close to the IPO price as you can. Pick them based on the leadership team and target industry. You'll be fine.
Which industries to avoid
@@dasher964 nikola industries
Thanks for the vid, this was a perfect breakdown
SPACs are for swing trading.. not long term investing. Sell your SPAC after the initial price spike (which almost all of them have at some point). With a baseline of $10, the risk is very low as long as you're swing trading.
Agree. Either park your money in Spacs you think have good management and potential targets that are trading sideways around 10$ and wait for rumors or LOIs and take the 30-100% profit on the initial run-up or have alerts set and have cash ready to go to get in early on the initial run ups by 13$ at the latest. Unless you truly believe in the company I wouldn't hold past merger, even then I would cut it so I am just riding with house money. The only Companies I truly believe in holding past merger right now are SBE(Chargepoint) and IPOB(Open Door). Draft Kings, UTZ, Repay and don't forget Burger King, are the best legit companies that have already merged. If Proterra goes this route too, they would be an easy hold.
Amazing explanation....very clear.thank you
The incentives of SPAC managers and investors aren’t aligned. As investors, we want to invest our money into quality companies. Meanwhile these managers just need to get something, quality or not, public for a quick buck. There’s a reason why nobody really talked about them in the past (and if they did, it was usually in a negative light). Stay away from SPACs.
Nice umbrella thinking logic about spacs. Have fun on losing out on electric vehicle competitors like Lion Energy or Beyond Meat competitors like tattooed chef. Some companies straight up have shitty targets but there are some gold mines out there. Saying otherwise is just plain ignorant and misleading.
@@MeatPlanet Of course there might be gems but there are also plenty of gems to find out of the companies that went public via a more traditional route. There's data that shows SPACs in general underperform the market, so avoiding SPACs as a general rule of thumb isn't being ignorant.
@@Messuduppotatoasia This year is different for spacs than Previous years so data doesn't really matter
Awsome! Learned a lot watching your video today. I never even payed attention to SPACs to be honnest.
Thank you. You helped me understand SPACs. 👍
Thanks for explaining spacs. They are much riskier than I initially thought.
Thank you sir. Pure facts. No bull****. The plain bagel legend!!!!!!!!
Dude kept shifting his head from the left to the right every single word
can't not see this now
Like a bad version of Jim Carrey.
Scrolled down to the bottom for this
Addyz
Brilliant breakdown. Thank you.
not long for you don't have to exclude Nikola anymore as an outlier.
That lighting is really nice.
That was a super explanation thank you!!
you just consistently make videos and say to stay away from certain topics and then those same topics just keep going up!
Noa is great as a dyslexic person this is EXACTLY what I've been looking for
Awesome videos. Thanks for the information ~
Thanks for educating me
What happens when you remove the big names from the IPO bucket to get their average return? I'm guessing it's not much better than the SPAC bucket. That's what the detectors always leave out.
It's 6.3%. The IPO history is a long and established one. If you take out big names from the IPO history, limit to around, say the 70's to today, it still comes out to around 6.3%.
Your guess is wrong
Sorry I have to argue with your statement on spacs, the ipos are been skyrocket recently personally I prefer buying spacs on low than paying over hundreds for doordash and Airbnb thanks.
Love your videos. Do you recommend any stocks?
Thanks for this video!
This is great stuff. Keep it up!
Good content as always. Would be interesting to know the difference between listing through a SPAC vs Listing through a reverse merger.
Hi Sbusiso, to put in simply:
Reverse Merger: A private company buying a public company, then both combining as a public company
SPAC: A public company buying a private company, then both combining as a public company
LOVE the new background
The PB is my new favorite youtube channel!
Thanks for the Great info
When Nikola is part of the highlights, you know there is something seriously doggy going on
Thanks :) it was simple to understand
Thanks for taking the other side point of view.
Thanks
my whole portfolio is spacs pretty much ahha. im glad i watched this great video!
Can you do a video about OTC, Richard?
Thank you!
Nice breakdown 👌
How do you feel about insider buying the spac and their compensation being correlated with the stock price ?
Glad I didn't watch this before I bought kcac for $14.00 🤣
your damn right
Whats kcac
@@forgotten1s it was QS pre merger, traded in a range between 14-25$ then went to 120$. The warrants went from 3$ to 46
@@goldentickers637 qs?
Is there a quiet period for companies who merge with SPACs?
Dear Mr. Plain Bagel,
I recently read an article in the Financial Post about the home care operator Sienna Assisted Living that still paid out dividends as soldiers came in to help, and they said that:
“Dividends are similar to interest costs on loans - dividends are paid to shareholders who have provided the capital necessary to invest in the maintenance, upgrading and building of new long-term care residences,” the company wrote in a statement to the National Post. “At no point has the payment of dividends taken away from front-line care.”
How can buying stock be treated as giving capital to a company when your just buying it from someone else, unless it’s some kind of issuance or some kind of shelf prospectus? Can a dividend payment really be seen as interest on a loan?
Bought VG post merger, doing great.
Bought Hyliion pre merger, getting killed.
Can someone help me understand what is the difference for a wealthy investor to invest in a SPAC versus a VC/PE firm?
A SPAC is a specific publicly traded company whose mission is to buy a single privately held company to make it a public company, and then do the thing that most companies want to do after going public -> raise a lot more equity to hypercharge growth (this was WeWork's plan, before its IPO [not SPAC] process fell apart). If done competently, a SPAC is like an IPO but without the 3-7% cut going to banks, and dodging the paperwork hassle could get them access to companies that otherwise wouldn't bother with an IPO
A VC firm gives money to companies that are just starting (VC -> Venture Capital, Capital raised for a new Venture), so it's much riskier. Most of their companies will fail since they are so early, but some will succeed and those that succeed will hopefully more than make up for the ones that fail.
A PE (private equity) firm often operates as a reverse SPAC firm. A lot of PE firms take public companies private, others just buy and hold private companies.
So VC, if run competently, is the highest *average* return because it is so monumentally high risk.
SPAC and PE are both companies that try to leverage the fact that there are barriers in the capital markets around public/private status, but do so in very different ways. Which style you'd expect to do better depends on what you think the market conditions are, and both are higher risk than just owning an index fund, but not as high risk as being a VC investor.
Or, to summarize:
Bonds: low risk low return, high liquidity
Index funds: medium risk medium return, high liquidity
SPAC / PE high risk high return (but for different reasons), low liquidity
VC ludicrously high risk, highest return, close to zero liquidity
@@jamesminor1325 thanks so much for the detailed answered, it made things a lot clearer to me. Adding mutual funds to the mix, would they be similar to Index Funds but with medium liquidity?
Hi Plain bagel, I really.like your videos you're very knowledgeable. A quick question what's the background music your using? I plan on making a channel about tech and this would go very well with me explaining stuff.
The song is called Scratch the Itch, it's free to use on RUclips!
@@ThePlainBagel Thank you so mich!
You should talk about leasing, its pros and cons
so it's easier to take a company without operations public while a company that runs an underlying business has to navigate through paperwork hoops? sounds to me like the regulations have to be changed to reduce this kind of behavior.
i am no expert so correct me if i am wrong.
Great video.
Best analysis yet. Much better than CNBC
Great video!
Excellent
What do you Think of investing in pre-acquisitions spac’s
Pershing Square tontine Looks really good right now
yes PSTH has a great sponsor behind it. Safe to say that gives them an edge but after all it depends on who they try to merge with and if the market likes it, stock can easily double
Do it
Awesome video!
Amazing channel!
2021 has been harsh to most of the de-SPACs
So similar to Private Equity Firms or Leverage-Buy-Out Firms or exactly the same thing?
Sounds like listings you find on Kickstarter.
Watching this after all of the SPACs have basically crashed (Virgin Galactic, Draft Kings, Nikola, etc) is pretty funny.
Do the SPAC shares convert 1:1 into the new company? Or how can I find out what that ratio will be? Thanks in advance.
Time to learn!
@The Plain Bagel SCAM. Avoid this boi, people
PE Firm stocks I usually look at:BX,CG,KKR,APO,ARES,BAM
BDCs I look at:ARCC,MAIN
Everything else is index funds
PE and BDCs for single stocks in alternative investments
Thanks! A video on your current take on Bitcoin maybe?
One SPAC that everyone seems to be talking about at the moment is CCIV. What do you think about it?
I had a great experience with SPAC - IPOB, IOPC, IPOE - still waiting on IPOD - Chamat is really churning these well.
I'm in on IPOF and can't wait to jump in on IPOO.
Can you do a video on positive spacs with potential and the benefits of the spac vehicle. It seems that the responsibility is in the investor to find the appropriate ones worth investing in. It’s saturated sure but there are some amazing ones.
so spac stock and the company stock ist buying. Will the spac stock become the company stock ? How the 2 companies will merge ?
I guess the 500% return I made off SPAC's in 2020 was a fluke huh? The key is getting in early and taking profit on the first big run up. Rinse and repeat...
Where do you find all the spac just before they announce a target?
Do you only get a money back guarantee if you buy the SPAC at its IPO?
Any thoughts on William Ackman's PSTH spac?
If you don’t want to hold for long term spac “hypothetically speaking” Can you buy these SPACs for 10-11$ and sell them for 12-13$... or are these spacs buys locked and can’t be sold the next day for an average investor ?
How about the number of shares ? (pre vs post merger) I believe it's the most important point.
We finally get a definition of what SPAC is at 2:25
Hey Plain Bagel🥯. Do you like Everything Bagel🥯? personally its my least favorite. Haha. Great vid as always. 🥯
So, how does a SPAC company becomes publicly traded? Virgin Galactic and Nikola stocks are actual shares or spac shares?
Glad I didn’t watch this before i bought BFT at 10.56 🙈
Why you may want to avoid them? What and not make ridiculous gains? I'm up 130% total portfolio in spacs in the past month.... And there's still tons of gains to be had. for those curious: IPOE, IPOD, IPOF, ROCH, LOAK (now DNMR), NGAC, PSTH the list goes on and on....
So if I have 1 million shares in a spac and said spac IPOs then reverse merges with another company, I now have the option to buy 1 million shares at $10?
Pro rata share of trust account. One thing to keep in mind is that if you purchased your shares on the open market, you are only entitled to your pro rata share of the trust account and not the price at which you bought the SPAC shares on the market. For example, if a SPAC had an IPO at $10 per share, but you bought 100 SPAC shares on the open market at $12 per share, the shares you purchased are associated with a trust account balance of about $10 per share, so your share of the trust account would be worth about $1,000 (not the $1,200 you paid for your shares). (sec.gov). It all depends on the IPO of the Spac, some have IPO'S of 11.30, 10.20 etc., PSTH Spac was the biggest SPAC ever at 22.00 per stock.
solution to all your cons: invest in the early stage and set a take profit. also, quit before the merge :-)
This is why you might want to invest in them
Cheers
Is it better to invest in stocks every month ($500) no matter how high/low the stock price is or wait till it is relatively low than buy in bulks please? Tank you
IMHO you buy every month because timing the market is nearly impossible. The longer your timeline before cashing out the greater the chance it will be at a profit.
Time in is better than Timing if you’re doing long term investing
@@andre-nunes Thank you
depends what stocks you're investing.
You're describing dollar cost averaging, there's a lot of content and academic research on the topic
I prefer the old video background style.
Don't tell me what to do, Bagel boy.
What happens if you buy a spac and once they announce the merger target, it drops under 10. Is there a way to redeem the 10 value before merger or is the 10 value only available if they don’t find a suitable merger within 2 years?
You can redeem the value anytime before a merger