SPACs: There's Now An ETF For That

Summary

• SPAK just started trading yesterday, so I examined the fund.
• The majority of the fund owns stocks that have already completed their merger with a SPAC.
• The fund does not have many of the newest or largest SPACs yet to announce a merger.

With all the attention SPACs have received, it was only a matter of time before an ETF covering SPACs came to market. Yesterday, the Defiance NextGen SPAC IPO ETF (SPAK) launched and I will be going through an overview of the fund in this article. I will be covering key details, index methodology/weighting, and examining the holdings.

SPAK Key Details

-Expense ratio: 0.45%

-Number of holdings: 35

-Rebalance frequency: Quarterly

SPAK Index and Methodology

Looking into the index and methodology, I found some interesting information on which SPACs are included in the fund. SPAK focuses the majority of its holdings on SPACs that have already completed a merger with a target company. As is noted below 80% of the fund is allocated towards that area and only 20% are allocated to SPACs that have not completed a merger. Within that 20%, the majority of that weight is allocated to SPACs that have already announced a merger, but have not been finalized yet. For details on that, I will refer you to the holdings section below.

The Indxx SPAC & NextGen IPO Index is a passive rules-based index that tracks the performance of the common stock of newly listed Special Purpose Acquisition Companies (“SPACs”), ex-warrants, and initial public offerings (“IPOs”) derived from Acquisition Companies over the preceding 36 months. - SPAK Index Description

Index inclusion criteria

-Market Capitalization: Over $250 million

-IPOs from SPACS: Daily turnover greater than or equal to $1 million

-SPACs: Traded on 90% of trading days in the last 3 months

-Float: Minimum free float equivalent to 10% of shares outstanding

Index weighting

-Weighting: Free float adjusted based on market capitalization

-SPACs already completed merger: Weight of 80%

-SPACs that have not completed merger: Weight of 20%

-Maximum Weight: Max weight for a holding is 12%

Addition

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.