Of all the places where sophisticated investors have been seeking cover from high inflation and big financial-market swings during the past year, there’s one surprise choice: special-purpose acquisition companies, or SPACs.The number of new SPACs that make it to the stage of issuing their own initial public offerings has fallen dramatically — to 67 this year from 613 in 2021 and 248 in 2020, according to data from SPAC Research.
It’s the prospect of a return which investors crave at the moment, given 2022’s stock and bonds selloff, wild volatility, and growing stagflation fears. During the 18 months to two years it could take to find a target and complete a merger, SPACs are required to keep their initial public offering proceeds in risk-free instruments — namely, Treasury bills — while accruing interest.
Morgan Creek and Exos launched an ETF, or exchange-traded fund, version of the fund, named the Morgan Creek-Exos Active SPAC Arbitrage ETF CSH , in February, opening up the arbitrage strategy to retail investors. — Amar Pandya of PenderFund Capital Management With shares of SPACs trading at a discount to their cash in trust, the potential upside for buyers, or arbitrage profit, is more than $4.3 billion as of Monday, according to Accelerate, a Calgary-based provider of alternative investment strategies for retail investors. Currently, the firm said, 98.2% of SPACs are trading at a discount to their net asset values, offering an average arbitrage yield of 4.8%.
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