Pre-market shares: the market craze fueled a SPAC boom. Here’s who’s at risk

Sign of the times: Among the most notable indicators of the market craze is the explosion of special purpose acquisition companies, or SPACs. So-called “blank check” firms, which allow investors to support sponsors who later seek a private entity to go public, raised tens of billions of dollars in 2021, an increase of more than 2,000% over 2020.

More and more people are sounding the alarm. US regulators have warned that investors should not support SPACs just because celebrities are linked. Meanwhile, short sellers’ interest in SPACs has increased, according to data from S3 Partners, indicating that an increasing number of traders think the excitement is exaggerated and stock prices are destined to fall.

Take a step back: if the SPAC frenzy got out of hand, who pays the price? Experts warn that not everyone will win – and some retail investors driven by madness can get hurt.

“It looks like the time for quick money is over,” said Atwater.

One concern is that there is simply too much money from SPAC pursuing a limited number of solid acquisition targets. This could force homeowners to consider acquiring less mature companies, which may not meet high growth expectations, or to enter into less profitable contracts.

“There are a large number of SPACs being created every day,” Will Braeutigam, partner and SPAC leader at Deloitte told me. “With so many SPAC sponsors out there bidding on the same companies, the positive value that you think there may be may not be there.”

Guillermo Baygual, co-director of mergers and acquisitions for Europe, the Middle East and Africa at JPMorgan Chase, notes that not all SPACs are created equal. He believes that this segment of the market “will become a more professional asset class over time” as investors distinguish between companies with a proven track record and those created just to seize the moment.

In the meantime, ordinary investors who have not been judicious can be left out, according to Atwater. He pointed to a race to buy shares of SPACs even before the acquisition targets were announced.

“You would think that investors would wait to see what [they] buy, “said Atwater.

If a target is not identified, the initial investors will get back the standard value of $ 10 per share, explained Atwater. But anxious investors who want to go before a deal and pay $ 20, $ 30 or $ 40 per share on the open market are placing purely speculative bets.

Some SPACs will end up as success stories. But Baygual warned that not all are a sure bet. “Investors must make their investment decisions based on the fundamentals,” he said.

Investors celebrate with the launch of Intel’s recovery plan

The most recent: Intel unveiled several major initiatives, including a $ 20 billion investment in two new chip manufacturing facilities in the United States.

The changes mark the company’s attempt to reaffirm its position as the undisputed leader in the semiconductor industry after several difficult years, reports my CNN business colleague Clare Duffy.

“We are setting the way for a new era of innovation and product leadership at Intel,” said Gelsinger in a statement.

Remember: Gelsinger took on a company that faced a number of challenges, including Apple’s unprecedented competition and an activist shareholder demanding change. Intel also experienced major delays in the production of next-generation chips, allowing TSMC and Samsung to move forward.

In the past two years, Intel’s shares have risen just over 19%, against almost 114% growth in the PHLX Semiconductor Index that tracks the broader sector.

Looking to the future: the new strategy can help solve many of these problems. Intel, which is working to perfect its next-generation 7-nanometer chip, plans to overhaul its manufacturing process and rely more on outsourcing. At the same time, it will invest more money on its Arizona campus, creating thousands of jobs.

Investor’s view: Intel shares skyrocketed nearly 4% in the pre-market, while competitor AMD’s shares fell. Shares in TSMC, the world’s largest contracted chip maker, fell 3% in Taipei on Wednesday.

GameStop shares plummet after disappointing results

GameStop’s stock skyrocketed this year thanks to the accumulated enthusiasm on social media, with novice traders betting that the video game retailer could make a profitable shift to digital that would increase sales.

Signs of change: Global e-commerce sales increased 175%, representing 34% of the company’s total net revenue in the quarter. In the same period last year, e-commerce represented only 12% of total sales.

“Our emphasis in 2021 will be on improving our e-commerce and customer experience, increasing our delivery speed, providing superior customer service and expanding our catalog,” said CEO George Sherman in a statement.

But will this be enough to keep investors interested? The company’s shares initially jumped more than 5% on the floor, but in the end they fell 14%. It closed Tuesday at $ 181.75 – down 9% since the beginning of the week, but still up almost 865% for the year.

Next

General Mills reports the results before the opening of the US markets.

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