You can’t look at any financial media and not see some sort of ominous headline about SPACs. It is true that today’s SPAC market looks nothing like the one we saw in late 2020 through February 15 of this year. However, what is often lost in headlines about SPACs is that the current SPAC market is bigger, more institutionalized, and more evolved. The SPAC market has also settled into how it should be looked at by investors: pre-merger SPACs are an event-driven strategy that is not necessarily correlated with stocks and bonds, while investing in DeSPACs is a hyper growth strategy, with high risk and possibly high reward. 

The pre-merger SPAC market started to show signs of life in June with 31 IPOs, but there are still signs of stress in DeSPACs. The massive number of SPAC IPOs in late 2020 and early 2021 has resulted in too many SPACs chasing too few deals. A number of factors haven’t helped, including regulatory uncertainty, some high profile DeSPACs having had high profile problems, poor performance of DeSPACs as a whole, and a drying up of PIPE money. All of these factors have given rise to redemptions on DeSPAC deals. According to Cantor Fitzgerald, deals with votes held from 6/17/2021 to 7/15/21 had redemptions of 32%, with nearly 40% of deals reporting redemptions greater than 50%. Redemptions are important as valuation assumptions usually assume that the full cash in trust will be available. Pops on day one are now increasingly rare. 

Going forward, we continue to believe the environment will stabilize as announcements and closings are outpacing new issues. 

The views and opinions expressed herein are those of the Chief Executive Officer and Portfolio Manager for Tuttle Capital Management (TCM) and are subject to change without notice. The data and information provided is derived from sources deemed to be reliable but we cannot guarantee its accuracy. Investing in securities is subject to risk including the possible loss of principal. Trade notifications are for informational purposes only. TCM offers fully transparent ETFs and provides trade information for all actively managed ETFs. TCM’s statements are not an endorsement of any company or a recommendation to buy, sell or hold any security. Trade notification files are not provided until full trade execution at the end of a trading day. TCM typically rebalances on Monday, however there could be daily trades that are not reflected in this recap.  The time stamp of the email is the time of file upload and not necessarily the exact time of the trades.

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