...They view SPACs as a fixed-income substitute with essentially no downside risk, and considerable upside potential....
Referencing paper:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3720919
We find that costs built into the SPAC structure are subtle, opaque, and far higher than has been previously recognized. Although SPACs raise $10 per share from investors in their IPOs, by the time the median SPAC merges with a target, it holds just $6.67 in cash for each outstanding share. We find, first, that for a large majority of SPACs, post-merger share prices fall, and second, that these price drops are highly correlated with the extent of dilution, or cash shortfall, in a SPAC. This implies that SPAC investors are bearing the cost of the dilution built into the SPAC structure, and in effect subsidizing the companies they bring public.
Submitted December 09, 2020 at 07:04AM by enginerd03 https://ift.tt/2JNqZjj
