Lately, there’s been a lot of talk surrounding SPACs. What are they? Are they a good investment? And where do I see the most opportunity?
Let’s start with defining SPACs…
SPACs stands for Special Purpose Acquisition Companies. Companies use this method to go public, without having to go through the rigorous process of listing shares via IPO.
Why SPACs should be treated differently…
While it’s easier for the company and can get shares into investors’ hands, buyers should beware and remain cautious surrounding SPACs because it’s clear that companies are taking advantage of the rush in retail trading and mania surrounding IPOs and SPACs in general.
SPACs are a different breed of trading, and they simply will not get the amount of certainty that comes with buying something like Microsoft (MSFT). However, if given due diligence, you most certainly can find diamonds in the rough.
Here is my SPACs checklist:
Each ticker I consider must go through this checklist to determine whether or not it’d be a good candidate for investment.
- Are they a disrupter in their field?
- Are they led by someone with experience and a history of success?
- Are they ahead of all others in their field thus far?
- Is this something that I can imagine will take off with current generations?
- Are they truly Innovative?
With a SPACs, you can’t expect to look at fundamentals and use those as a deciding factor. It’s all about companies that are innovative, have proven to be unique leaders, and are being taken public by somebody that knows what they’re doing. Because there are so many of them, it’s critical to look at who is running them, ask yourself – are they innovative themselves, and would they put their name behind companies and brands that are likely to grow?
Tune in next week, where I will share with you my top three SPACs that I see the most potential with.