48 days ago • Posted by Martin Boujol
SPAC investing is not an easy way to riches
SPACs are increasingly drawing the attention of retail investors looking to make a quick profit. Investors often go in blindly without knowing who the company will acquire. However, amateur investors do not seem to mind the risk, blinded by the gain potential. Churchill Capital Corp IV was probably the most vivid example, with shares rising 548% since the IPO, reaching a market valuation of $17 billion. However, the price dropped 42% last week, taking away $8 billion of market value. So far this year, 189 SPACs raised $60 billion already, over half the total amount of $83 billion for 2020. If the pace continues, the markets will raise a total of $300 billion with SPACs for the year. Investors should remember that the pre-merger share price will not necessarily be under the post-merger share price. This is an unbacked and dangerous guess for your portfolio.