Investing in SPACs

s33b
2021-05-05

There has been a lot of heat recently in the SPAC market. Here is some reasons why investing in SPAC is almost potentially low risk.

1. SPACs can be redeem at NAV (10 USD) even if the share price drips below 10 USD*

Here is a scenario if I purchase a 200 shares of SPAC at 10.40 USD and want to redeem it.

If you redeem your SPAC shares at a value of USD 10 / share, you will lose 0.40 USD per share. The commission you pay will be 2 USD to Tiger Brokers, 0.01 USD SEC membership fee, and 7% GST on the aforementioned fees (7% x 2.01 USD = 0.14 USD). Hence, the total fee you pay will be roughly 2.14 USD in total.

a) Your net loss is 82.14 USD (80 USD from capital losses + 2.14 USD from fees)

b) You receive 1997.86 USD (10 USD/share x 200 shares - 2.14 USD fees).

The upside is unlimited and your downside risk is 82.14 USD from purchasing 200 shares of the SPAC.

If you bought the SPAC at 10 USD, your downside risk is only the commission you have to pay 0.01 USD / share + 0.01 USD SEC membership + 7% GST (Singapore)

*confirmed by Tiger Broker

2. Unlimited Upside

As mentioned the upside for a SPAC is unlimited. Some SPACs have gone up 10% to 600% $Churchill Capital Corp IV(CCIV)$ or more. Personally I am invested in almost 70 different SPACs. The most I have paid for any SPAC is $12 to limit my down side risk. There are many quality SPACs now trading at 10 USD or below!

Here are 2 of my favourite ones:

$Soaring Eagle Acquisition Corp(SRNG)$Rumour to merger with Gingko Bioworks. Biology is one of the industries that is touted to boom in the next decade.

$Avanti Acquisition Corp(AVAN)$Great management team

Disclaimer: This is not trading advice, merely sharing my thoughts.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

  • s33b
    2021-05-07
    s33b
    SPACs shares can be redeemed at NAV ($10) even if it is below 10 USD during the redemption period. So if you bought at 10 USD and want to redeem, your only loss is the commission $0.01/share.
  • Daruma
    2021-05-07
    Daruma
    is the unit nav at $10 or the common share at $10 ? i am quiTe confused as i see there r spac common share below $10 now..
  • 日青凡晨
    2021-09-25
    日青凡晨
    Can buy Grab (once tha SPAC deal close by end of this year) ?
    • s33b: 
      yes if you want to wait for the merger to occur before investing in Grab.
  • Panda King
    2022-01-01
    Panda King
    looking to see how this space works out in singapore
  • Mavycel
    2021-10-07
    Mavycel
    Hi check this out @Kate86
  • s33b
    2021-05-06
    s33b
    I am in ACG as well but for this post I'm referring to SPACs near or under 10 USD.
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