The past twelve months have seen a boom in special-purpose acquisition companies also known as SPACs or blank check companies. These are companies that raise cash intending to eventually acquire private companies and bring
SPCX: SPACs Are The 'Canary In The Coal Mine'
Summary
- Special Purpose Acquisition Companies have seen an immense increase in activity over the past year as retail investors have piled into the market.
- The boom in SPAC activity has promoted the launch of SPAC ETFs such as SPCX which allow investors an easy way to buying a wide basket of blank check companies.
- Too much SPAC money chasing too few quality firms may cause an increase in deals at unattractive valuations or with "regulatory patchy" companies.
- The startling growth of SPAC activity may indicate that the bull market is peaking as investors pile into increasingly unproductive investments, including SPACs and, more recently, NFTs.
- Considering the environment as well as poor historical returns of SPACs (largely due to immense promoter fees), investors may want to avoid SPCX for the time being.
Harrison is a financial analyst who has been writing on Seeking Alpha since 2018 and has closely followed the market for over a decade. He has professional experience in the private equity, real estate, and economic research industry. Harrison also has an academic background in financial econometrics, economic forecasting, and global monetary economics.
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