The IPO market is booming now. Many well-known companies have decided to go public now, and many are looking for nontraditional ways to make their shares available to ordinary investors. While traditional IPOs are still abundant, you are also seeing many companies choosing direct listings on the stock exchanges.
Another popular alternative that has taken the investment world by storm involves special purpose acquisition companies, or SPACs for short. SPACs are publicly traded shares in their own right, but their only mission is to find a suitable private company for the merger. In doing so, the private company manages to have its shares publicly traded, and SPAC’s first investors generally get a good payday, as well as the opportunity to enter the job market.
With hundreds of SPACs on the market, it is difficult to know which to follow. Below, however, are three that investors can’t really ignore. The future of these three SPACs may well determine the progress of the entire business.
Image source: Getty Images.
1. Churchill Capital IV
Among SPACs, Churchill Capital IV (NYSE: CCIV) has received more attention lately. Churchill offered shares in September 2020 and, as the name suggests, was the fourth offering by SPAC expert Michael Klein. It is the largest Churchill SPAC to date, having raised $ 1.8 billion.
Rumors have long been circulating about the possible merger of Churchill Capital IV with electric vehicle maker Lucid Motors. Deliveries of the Lucid Air luxury sedan are scheduled to begin this spring, and with a starting price of just under $ 70,000 and a projected maximum range of over 500 miles, many automobile aficionados are very excited about the prospects for the California-based company.
What is surprising, however, is that Churchill Capital IV’s shares more than tripled without any firm agreement with Lucid in effect. This is a ton of speculation, and shareholders can lose a lot of a deal that Lucid does not materialize. However, the amount people are paying for a SPAC that appears to have the inner band in a possible EV merger shows how much activity there is in the electric vehicle space now.
2. Pershing Square Tontine Holdings
The largest SPAC ever offered came from Bill Ackman’s hedge fund in September 2020, and Pershing Square Tontine Holdings (NYSE: PSTH) It was a great success. SPAC broke many of the conventions the industry has established, including going public with a share price of $ 20 instead of $ 10. In all, Pershing Square Tontine raised $ 4 billion to work on finding a candidate for the acquisition.
Pershing Square Tontine has not yet found a candidate for the merger, and this has caused some SPAC investors to be concerned about their stock price hikes recently. There have been some rumors about possible targets, mainly Stripe, a private fintech company. However, there were also some who tried to debunk this idea and, so far, there has been no announcement.
Pershing Square Tontine is likely to find a target for the merger, and when it does, it will be great news. But if Ackman’s SPAC is in any way the 24-month period without finding a partner, this can be a major setback for the SPAC industry in general.
3. Capital Hedosophia Holdings V
Finally, an article on SPACs would not be complete without at least one of the offerings from technology venture capitalist Chamath Palihapitiya. The founder of Social Capital Capital Hedosophia Holdings V (NYSE: IPOE) it’s just one of the six SPACs he’s offered and three successful combinations with names like Virgin Galactic Holdings (NYSE: SPCE), Opendoor Technologies (NASDAQ: OPEN), and Clover Health (NASDAQ: CLOV) speak for themselves.
SCHH V has signed an agreement to merge with Social Finance, the company behind the popular SoFi financial app. With financial services, including loans, banks and investments, SoFi aims to revolutionize the financial sector. SCHH V investors are excited about the possible combination, as the SPAC price has doubled since the announcement. Even so, many see even better times for SoFi, and this could keep stocks rising long after the SPAC merger is complete.
Be smart with SPACs
Not all special purpose procurement companies will be successful. Some combinations are not as profitable as others, and some SPACs may not even find candidates for the merger.
However, with so many interesting private companies looking to go public, you can expect the SPAC industry to be full of enthusiasm for the foreseeable future. Keep an eye on these three SPACs in particular, because what happens to them can set the course of future activity in the area for months or even years.