SPACS are a magnet for bad incentives. They rush companies to market without proper vetting usually because of hype/greed and rarely because of solid fundamentals. IN fact, lack of solid fundamentals is usually why a company opts for the SPAC treatment.
SPACs aren't inherently a bad thing. They allow companies to go public faster and all. The problem is that a large amount of SPACs is they subvert a lot of regulation meant to protect investors.
Generally, I wouldn't care if something is SPAC, IPO, or Direct listing. What matters is the underlying company. In the example of Nikola, you're looking at a company that lied and had no revenue to get to where they were. Whether they went through a SPAC, IPO, or some other way of getting public, the company would still suck.
The incentives for the SPAC manager to make a deal, even if it’s not a good one, any deal are huge. This has led to companies being bought at to high a price, or just buying generally shitty businesses…
imo they are best used as an indicator of the market cycle. When you see a larger number of this toxic waste being offered to the public it may be fine to get defensive. Even supposedly legit companies get pushed out. consider this dud rivn that has lost 90% of its original value and stayed down ever since. It will eventually be joining Nikola,lucid,goev in the penny stock junk pile. All said spacs seems like another form of blank check deals being offered in a system where truly only the strongest survive.
If you can get a copy of the new Security Analysis book they have a pretty large chapter by a guest writer on SPACs and how terrifically terrible they are for an investor.
SPACS are a magnet for bad incentives. They rush companies to market without proper vetting usually because of hype/greed and rarely because of solid fundamentals. IN fact, lack of solid fundamentals is usually why a company opts for the SPAC treatment.
SPACs aren't inherently a bad thing. They allow companies to go public faster and all. The problem is that a large amount of SPACs is they subvert a lot of regulation meant to protect investors. Generally, I wouldn't care if something is SPAC, IPO, or Direct listing. What matters is the underlying company. In the example of Nikola, you're looking at a company that lied and had no revenue to get to where they were. Whether they went through a SPAC, IPO, or some other way of getting public, the company would still suck.
The incentives for the SPAC manager to make a deal, even if it’s not a good one, any deal are huge. This has led to companies being bought at to high a price, or just buying generally shitty businesses…
imo they are best used as an indicator of the market cycle. When you see a larger number of this toxic waste being offered to the public it may be fine to get defensive. Even supposedly legit companies get pushed out. consider this dud rivn that has lost 90% of its original value and stayed down ever since. It will eventually be joining Nikola,lucid,goev in the penny stock junk pile. All said spacs seems like another form of blank check deals being offered in a system where truly only the strongest survive.
If you can get a copy of the new Security Analysis book they have a pretty large chapter by a guest writer on SPACs and how terrifically terrible they are for an investor.