public service announcement, stay away from SPACs and save yourself a lot of money. don't regret and become another hyflux.
https://sg.finance.yahoo.com/news/c...-should-be-deemed-uninvestable-162438685.html
Akiko Fujita
Thu, 3 February 2022, 12:24 am·5-min read
In this article:
Famed short-seller Carson Block raised the alarm on special purpose acquisition companies (SPAC) at the height of their activity, building his bets while warning retail investors about “a scam” in the market.
Now, the CEO of investment research firm Muddy Waters Capital is starting to see the reckoning.
Since raising a record $144 billion through 613 blank check IPOs last year, investors have begun to turn on these companies, in the face of poor returns and choppy market conditions.
From sports betting company DraftKings (DKNG) to battery technology startup QuantumScape (QS) and electric vehicle maker Lordstown Motors (RIDE), former Wall Street darlings have seen their valuations slashed by more than half from their highs.
You can't look at it and say every company that's gone public via SPAC is uninvestable,” said Block on Yahoo Finance Live. “But if you're going to look at probabilities, the probabilities are much higher that something that went public via SPAC versus IPO should be deemed uninvestable.”
The structure of SPACs have allowed younger startups to come to market, without the scrutiny reserved for traditional IPOs. SPACs are shell companies set up by investors or sponsors to strictly raise capital through an IPO, to eventually acquire another company. They are sometimes referred to as blank-check firms because IPO investors often have no idea about the firm the funds raised will be used to invest in.
While SPACs have been around for decades, companies have increasingly turned to them during the pandemic, in part because of the speed with which the structure allows companies to come to market.
Block said that very structure has created inherent risks in financial markets.
“You're generally giving 20% of the company away to the SPAC promoter, so these are not designed really to create wealth structurally. They're designed more to transfer wealth,” he said. “The incentives to put a SPAC together are very strong to just do something, just close some transaction. And then you as the SPAC promoter get hundreds of millions of dollars in your pocket, and you can sell out of that.”
https://sg.finance.yahoo.com/news/c...-should-be-deemed-uninvestable-162438685.html
Carson Block: Most firms that went public via SPAC 'should be deemed uninvestable'
Akiko Fujita
Thu, 3 February 2022, 12:24 am·5-min read
In this article:
Famed short-seller Carson Block raised the alarm on special purpose acquisition companies (SPAC) at the height of their activity, building his bets while warning retail investors about “a scam” in the market.
Now, the CEO of investment research firm Muddy Waters Capital is starting to see the reckoning.
Since raising a record $144 billion through 613 blank check IPOs last year, investors have begun to turn on these companies, in the face of poor returns and choppy market conditions.
From sports betting company DraftKings (DKNG) to battery technology startup QuantumScape (QS) and electric vehicle maker Lordstown Motors (RIDE), former Wall Street darlings have seen their valuations slashed by more than half from their highs.
You can't look at it and say every company that's gone public via SPAC is uninvestable,” said Block on Yahoo Finance Live. “But if you're going to look at probabilities, the probabilities are much higher that something that went public via SPAC versus IPO should be deemed uninvestable.”
The structure of SPACs have allowed younger startups to come to market, without the scrutiny reserved for traditional IPOs. SPACs are shell companies set up by investors or sponsors to strictly raise capital through an IPO, to eventually acquire another company. They are sometimes referred to as blank-check firms because IPO investors often have no idea about the firm the funds raised will be used to invest in.
While SPACs have been around for decades, companies have increasingly turned to them during the pandemic, in part because of the speed with which the structure allows companies to come to market.
Block said that very structure has created inherent risks in financial markets.
“You're generally giving 20% of the company away to the SPAC promoter, so these are not designed really to create wealth structurally. They're designed more to transfer wealth,” he said. “The incentives to put a SPAC together are very strong to just do something, just close some transaction. And then you as the SPAC promoter get hundreds of millions of dollars in your pocket, and you can sell out of that.”
