Sir Richard Branson walks around the new Virgin Galactic SpaceShipTwo at its roll out in the Mojave Desert, about a year and a half after Virgin's last rocket plane broke into pieces and killed the test pilot.There's lots of excitement that tech superstar Chamath Palihapitiya'sis buying a 49% stake in Virgin Galactic to do space flights.
That's a long time to wait for an investment, but regardless: SPACs — along with IPOs — are suddenly hot investment vehicles. 28 SPACs have gone public this year, raising $6.1 billion, which at this pace will easily surpass 2018's record of 46 SPACs, according to Renaissance Capital.Why are SPACs suddenly so popular? It helps to have a hot stock market, and a hot IPO market, but there's also growing interest in hiring professional expertise to make purchases on behalf of investors.
Another help for SPAC investors: There's an "out clause." The proceeds from the IPO are initially held in a trust account that can only be accessed to make the acquisitions. Once the acquisitions are made, the public stockholders can elect to have their shares redeemed for cash if they don't want to stay in the deal.
He notes that since 2017, there have been 108 SPACs. The average return has been a measly 2%, but that includes companies that have not made acquisitions.One of the reasons for the underperformance is what Kennedy calls a "finder's fee" that enables the founders to buy into the SPAC, essentially for nothing. In the case of Social Capital, initial shareholders got 20 percent of the company at an insider price of $0.002 cent. That's not a typo: $0.002 cent.
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Source: CNBC - 🏆 12. / 72 Read more »