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Stocks
Why I Like Investing in SPAC Stocks
Blank check stocks can be good deals— especially those with planned mergers — and some examples
I’ve written a lot about various SPAC stocks (i.e., special purpose acquisition companies). But I wanted to discuss why I like this category of stocks — especially those that have announced mergers with private companies.
In addition, I will discuss a few SPAC deals that I like right now.
What Are SPAC Stocks?
SPAC stocks start out as “blank check” companies. They look for a private company to merge with. In the end, it becomes a reverse merger, as the private company ends up taking up the majority of the public shares outstanding. So in a sense, they are a type of going public transaction.
But that is about where the comparison with IPOs (initial public offerings) ends. One of the key differences is that the management learns ahead of the closing transaction how much cash will be raised. In the IPO stage, they never know the exact amount, if any, of the final dollar amount.
But this is not as important to investors as the following major difference with IPOs. They give investors financial forecasts.
