Investing Insights

In The SPAC Shell Game – Don’t Be The Sucker

Dan Irvine
Principal, 3Summit Investment, Management, LLC
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In this episode we cover dig into the latest investment craze…SPACs. Special Purpose Acquisition Companies (“SPACs”) are extremely complex and have historically been highly efficient wealth destroyers for retail investors. Complexity obfuscates the risks and costs investors will bear.

If you are thinking of investing in a complex structured deal like a SPAC and you are wondering who is most likely to bear the greatest risk and costs, it is probably you. The richest people on Wall Street are not necessarily the best investors, but the best deal makers. They are experts at structuring heads I win, tails you lose deals, where the financial success of their investors has little to no bearing on their own financial rewards.

Chart:

SPAC IPOs
Source: SPAC Insider

In researching this episode, the research piece below was invaluable. If you want to dig deeper into the topic of SPACs this is a must read.

Klausner, Michael D. and Ohlrogge, Michael and Ruan, Emily, A Sober Look at SPACs (October 28, 2020). Yale Journal on Regulation, Forthcoming, Stanford Law and Economics Olin Working Paper No. 559, NYU Law and Economics Research Paper No. 20-48, European Corporate Governance Institute – Finance Working Paper No. 746/2021, Available at SSRN: https://ssrn.com/abstract=3720919 or http://dx.doi.org/10.2139/ssrn.3720919

3Summit Investment Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

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