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SPAC: Difference between revisions
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Now you might think a little arithmetic is in order. But if that seems too simplistic, consider this academic survey: | Now you might think a little arithmetic is in order. But if that seems too simplistic, consider this academic survey: | ||
{{quote|We find that costs built into the SPAC structure are subtle, opaque, and far higher than has been previously recognized. Although SPACs raise $10 per share from investors in their IPOs, by the time the median SPAC merges with a target, it holds just $6.67 in cash for each outstanding share. We find, first, that ''for a large majority of SPACs, post-merger share prices fall'', and second, that ''these price drops are highly correlated with the extent of dilution, or cash shortfall, in a SPAC''. This implies that SPAC investors are bearing the cost of the dilution built into the SPAC structure, and in effect subsidizing the companies they bring public.<ref>[https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3720919 ''A Sober Look at SPACs'', Yale Journal on Regulation}} | {{quote|We find that costs built into the SPAC structure are subtle, opaque, and far higher than has been previously recognized. Although SPACs raise $10 per share from investors in their IPOs, by the time the median SPAC merges with a target, it holds just $6.67 in cash for each outstanding share. We find, first, that ''for a large majority of SPACs, post-merger share prices fall'', and second, that ''these price drops are highly correlated with the extent of dilution, or cash shortfall, in a SPAC''. This implies that SPAC investors are bearing the cost of the dilution built into the SPAC structure, and in effect subsidizing the companies they bring public.<ref>[https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3720919 ''A Sober Look at SPACs'', Yale Journal on Regulation]</ref>}} | ||
Someone is getting rinsed, in other words. Could it be our old friend the [[ultimate client]], again? Will | Someone is getting rinsed, in other words. Could it be our old friend the [[ultimate client]], again? | ||
Will Granddad ''never'' learn? | |||
{{sa}} | {{sa}} | ||