Disinterest is misplaced, says fund manager
Did the SPAC faucet run dry?
New issuance via Special Purpose Acquisition Vehicles – blank check entities that raise capital to merge with private companies and go public – fell in April, with just 10 new PSPCs entering the market compared to 109 in March, according to SPAC Research.
Investors were particularly frightened by new guidance from the Securities and Exchange Commission indicating that it could reclassify the PSPC warrants as liabilities, which would require existing and potential PSPCs to recalculate significant parts of their financial statements.
Yet with PSPCs raise more money in the first three months of 2021 than throughout the past year, some of the recent disinterest may be “shifted,” Morgan Creek Capital Management’s Mark Yusko told CNBC this week.
“This is a long-term trend,” Yusko, founder, CEO and chief investment officer of his company, told CNBC on Monday. “ETF Edge”. “We believe that the SPAC merger will become the preferred method for high growth innovative companies, or what we call the companies of the future, to go public.”
After a “frenzied” first quarter for new issues and the SEC crackdown, “It is normal and natural to have a little lull,” he said.
Even so, PSPCs are “the easiest way” for retail investors to access new public companies, said Steve Grasso, director of institutional sales at Stuart Frankel, in the same “ETF Edge” interview.
“With a PSPC, you make $ 10, you vote for the deal or you don’t vote for the deal, and you’re on a level playing field and getting into those rounds of investors where elsewhere in the market, the the retail investor can’t get into it, ”said Grasso, who is also a CNBC contributor.
“You can regulate them a bit with their forecast, … but other than that they’re the best vehicle for a retail investor,” he said.
There are currently three PSPC related exchange traded funds in the market: Yusko is actively managed Morgan Creek – ETF created by Exos SPAC (SPXZ), the wide Defiance Next Gen SPAC Derivative ETF (SPAK) and Tuttle Tactical Management’s ETF SPAC and new issue (SPCX).
Partnering with active managers is probably the safest way for ETF investors to play in the SPAC space, said Tom Lydon, CEO of ETF Trends, adding that while SPAK owns around 180 SPACs, it is “not necessarily as critical as what’s in the index” like a fund like SPXZ.
“You need active management in the PSPC area,” Lydon said. “This is an area for the average investor who probably doesn’t have the skills or abilities to deepen the team and also what might be on their radar when it comes to acquisitions.”