6 SPAC stocks investors need to know.
Rather than dealing with the hassle of an initial public offering, more and more private companies are going public via a reverse merger courtesy of a SPAC. What is a SPAC? SPACs, or special purpose acquisition companies, go public strictly to raise funds in order to acquire private companies. Also called “blank-check companies,” SPACs usually have two or three years to make a deal before they have to return the funds to investors. SPACs have existed since the early 2000s, but they have recently enjoyed a resurgence in popularity, and in 2021, that surge shows no signs of slowing down. In 2019, 59 SPACs hit the market. That number leapt to 248 SPACs in 2020. With more options than ever to choose from, prudent investors will do their homework to determine which SPACs to invest in. Here are the six of the best SPACs to buy.
Churchill Capital IV (ticker: CCIV)
Of the many, many SPACs on the market today, Churchill Capital IV has become one of the most famous — or perhaps infamous. Usually when a SPAC announces a merger with a private company the market reacts favorably, but within days of Churchill reaching a deal with Lucid Motors, shares plummeted. Founded by a former Tesla (TSLA) employee, Lucid Motors is a much-lauded electric vehicle (EV) company that had received plenty of hype as electric vehicle stocks continued to gain momentum over the course of 2020. When the deal with Lucid was announced, shares of Churchill initially rose more than 30%, but as investors realized the valuation was getting out of control, buyers quickly ran out of steam, and shares fell back to earth. Now, Churchill looks reasonably priced and Lucid has the funding to put its big plans to take on the EV market into motion.
Pershing Square Tontine Holdings (PSTH)
As you might have already guessed, Pershing Square Tontine Holdings is brought to you by hedge fund Pershing Square and its founder Bill Ackman. It makes sense why a SPAC would appeal to Ackman — he can work with a target company’s management team directly, dig into their finances and provide the funding to take that company to the next level. Speaking of funding, Pershing Square Tontine Holdings has plenty — the SPAC was recently ranked as the most popular SPAC among hedge funds, which have invested more than $800 million in Pershing Square Tontine Holdings. That’s on top of the $4 billion the SPAC raised when it went to market in July 2020, providing the SPAC with plenty of funding to take over one of the “mature unicorns” Ackman is looking for.
Soaring Eagle Acquisition Corp. (SRNGU)
New SPAC investors will quickly notice how often successful SPAC corporations will return for seconds, forming their next SPAC and initiating another merger as quickly as possible to capitalize on the current SPAC craze. Sometimes this can be a warning sign, as these groups are often just looking to make a quick buck — but sometimes a record of bringing great companies to market is a strong indicator of future success. That’s why investors should pay close attention to Soaring Eagle Acquisition Corp., brought to you by the same team that took DraftKings (DKNG) public in 2019, followed by Skillz (SKLZ) in 2020. DraftKings has become one of the most successful SPAC acquisitions of the last few years, and the Soaring Eagle team of Harry Sloan and Jeff Sagansky wants to find the next big thing with their seventh SPAC.
Deerfield Healthcare Technology Acquisitions Corp. (DFHT)
The Deerfield Management Company focuses on both public and private health care companies, and has brought three SPACs public since early 2018 — but it has never tried anything quite like this. Deerfield Healthcare Technology Acquisitions Corp. has announced that it will merge not only with CareMax Medical Group, but also with IMC Medical Group, at the same time. Both companies provide health care services for seniors living in Florida, and by the time the paperwork is signed, the combined company will have 26 medical centers serving 16,000 Medicare Advantage members and 36,000 managed Medicaid and Affordable Care Act patients. The health care sector has experienced a recent boom as people navigate the new normal of getting to a doctor, and Deerfield’s double SPAC merger will help the company capitalize on health care in a post-pandemic world.
Ceres Acquisition Corp. (CERAF)
There’s a lot of cheap money floating around the market and into the pockets of private companies merging with SPACs. As a result, not all of the companies being taken public are the best investments. One way to reduce the risk of buying shares of a SPAC that won’t be around for much longer is to find one in a growing industry — and growth is exactly what the marijuana industry is all about. That’s why Ceres Acquisition Corp. made a deal with Parallel, a fast-growing marijuana dispensary company with 50 locations across four states. The company plans to use the funds from the deal, which is expected to close this summer, to enhance its research and development efforts as well as the “customer experience,” something that the leadership team at Parallel, led by Wrigley-gum heir Beau Wrigley, has deep experience with.
Silver Spike Acquisition Corp. (SSPK)
Ceres isn’t the only SPAC on the market with an eye on the marijuana industry. In January, Silver Spike Acquisition Corp. merged with WM Holding Co., the parent company of Weedmaps. Weedmaps, as the name implies, provides locations and reviews of marijuana dispensaries for 420-friendly customers via its website and app. That said, WM isn’t just Weedmaps — it’s also WM Business, a software as a service branch of the company that provides business software and development to marijuana-related companies. While other publicly traded marijuana companies are focused on growing pot and establishing dispensaries, WM Holding is far more consumer-facing, which means no matter who is growing, harvesting and selling marijuana, Silver Spike Acquisition wins. And as the marijuana legalization movement continues to gain steam across the country, SSPK will continue to win.
Six of the best SPACs to invest in now:
— Churchill Capital IV (CCIV)
— Pershing Square Tontine Holdings (PSTH)
— Soaring Eagle Acquisition Corp. (SRNGU)
— Deerfield Healthcare Technology Acquisitions Corp. (DFHT)
— Ceres Acquisition Corp. (CERAF)
— Silver Spike Acquisition Corp. (SSPK)
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Update 03/18/21: This story was published on an earlier date and has been updated with new information.