The IPO market is currently red hot. Many large companies have decided to announce now, and many of them are looking at some non-traditional ways to make their shares available to ordinary investors. Although traditional IPOs are still plentiful, you can also see that many companies choose direct listings on stock exchanges.
Another popular alternative that has taken the investment world by storm involves the acquisition of special purposes, or SPACs for short. SPACs are traded in their own legal shares, but their only mission is to find a suitable private company to merge with. By doing so, the private company can trade its shares publicly, and early SPAC investors often get a good payday, as well as the opportunity to get on the ground floor.
With hundreds of SPACs in the market, it’s hard to know which to follow. Below, however, are three that investors really can not afford to ignore. The future of these three SPACs may well determine how the health of the entire enterprise progresses.
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Churchill Capital IV
Among SPACs, Churchill Capital IV (NYSE: CCIV) has received by far the most attention lately. Churchill offered shares in September 2020, and as its name suggests, it was the fourth offering from SPAC specialist Michael Klein. It is the largest Churchill SPAC to date, with $ 1.8 billion.
Rumors have been circulating for some time about Churchill Capital IV possibly merging with electric vehicle maker Lucid Motors. Delivery of the Lucid Air luxury sedan will begin in the spring, and with a price tag of just under $ 70,000 and a maximum projected range of more than 500 miles, many car enthusiasts are very excited about the company’s prospects in California.
What is surprising, however, is that Churchill Capital IV shares more than tripled without any firm agreement with Lucid in place. This is a lot of speculation, and shareholders are losing a lot of the deals with Lucid. Nevertheless, the amount people pay for a SPAC that apparently has the inner lane on a possible merger shows just how much activity there is currently in the electric vehicle space.
2. Pershing Square Tontine Holdings
The largest SPAC ever offered comes from Bill Ackman’s hedge fund in September 2020, and Pershing Square Tontine Holdings (NYSE: PSTH) was a big hit. The SPAC has broken many of the conventions that the industry has set, including a share price of $ 20 per share rather than $ 10. Pershing Square Tontine has raised a total of $ 4 billion to work to find an acquisition candidate.
Pershing Square Tontine has not yet found a merger candidate, and this has caused some investors in SPAC to become anxious about the price increase its shares have been experiencing recently. There were rumors about possible targets, especially the private fintech company Stripe. Yet there were also some who tried to disprove the idea, and so far there have been no announcements.
Pershing Square Tontine is likely to find a merger target, and then that will be big news. But if Ackman’s SPAC somehow goes the 24 month period without finding a partner can be a major setback for the SPAC industry.
3. Social capital Hedosophia Holdings V
Finally, an article on SPACs would not be complete without at least one of the offerings of pioneer technological venture capitalist Chamath Palihapitiya. The founder of social capital Social Capital Hedosophia Holdings V (NYSE: IPOE) is only one of the six SPACs he has offered, and three successful combinations such as the Virgin Galactic Holdings (NYSE: SPCE), Opendoor Technologies (NASDAQ: OPEN), en Piano Health (NASDAQ: CLOV) speak for themselves.
SCHH V has entered into an agreement to merge with Social Finance, the company behind the popular SoFi financial app. With financial services that include loans, banking and investments, SoFi aims to revolutionize the financial industry. SCHH V investors are excited about the possible combination as the SPAC price has doubled since the announcement. Yet SoFi anticipates even better times, and it could move stocks higher, long after the SPAC merger is complete.
Be smart with SPACs
Not every special purpose procurement company will be successful. Some combinations are not as profitable as others, and some SPACs may not even find merger candidates.
Yet, with so many interesting private companies looking for the public, you can expect the SPAC industry to be full of excitement in the foreseeable future. Pay particular attention to these three SPACs, because what happens to them can still determine the course of future activities in the area for months or even years.