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Comment by legym | Hacker News Reader

Been trading SPAC's recently. Seeing a huge influx of SPACs in renewable energy. Jump in at the beginning and the most you can lost is 10$ if the SPAC fails. When it receives a letter of intent(LOI) you'll see a big boost to the stock price. When the definitive agreement (DA) is announce there is another 20% jump. After the merge and symbol change, the price drops and then slowly comes up.

With so many coming out, just keep jumping to new SPACS as the LOI or DA is announced. Just wanted to share my experiences.

EDIT: Nikola and QuantumScape (NKLA/QS) are the big ones that got attention. Every SPAC is hoping to make a run like QS; 10$ went all the way up to 100$ at one point. NKLA was a scam, but brought a lot of attention

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I think this is a rather oversimplified view of SPACs. Matt Levine recently wrote a nice piece about the magic of SPACs. Here is a paper he cites: https://corpgov.law.harvard.edu/2020/11/19/a-sober-look-at-s...

Any talk of magic when it comes to money reminds me of the vague, hand-wavy claims of people peddling pyramid schemes.

I mean... read the article before you go off on your soapbox. It's not suggesting that SPACs are "magic" as in pull a rabbit out of a hat. It's actually describing the technicalities of who is paying for what in a SPAC.

Unfortunately I cannot edit my comment anymore: Here is the text by Levine: https://www.bloomberg.com/news/newsletters/2021-01-08/money-...

How do you get into trading SPACs? Where do you trade them and where do your tips come from?

/r/spacs/ but its a lot of hypemen/astroturfing to sort through.

The most you can lose is $10? No matter how many shares you own? Or is that per share?

I thought you get your $10 back if there's no merger. Is this not the case?

OP's information is a bit sparse. A SPAC is a regular stock on the stock market and its share price is tied directly to the amount of money used to instantiate it in the first place. In general, you hold it for as long as you want and it will bounce around within a dollar of its baseline price. You can sell it at any point and get your money back. I can't really think of a scenario in which you would lose more than a few percentage points of your money without a lot of warning.

The downside of SPACs is that if they don't do a reverse merger they're unlikely to appreciate in value like a normal stock (or index), so you're basically gambling the opportunity cost against a chance of significant gain.

Yes. SPACS are not stocks, not sure what the other replier is talking about (they're SPVs).

If a SPAC doesn't find a company to merge with you get your money back and some interest. If a SPAC finds a company, you have the choice to (1) stay invested in the SPAC and therefore the company or (2) refuse the merger and get your money back with interest.

Interestingly when you invest in a SPAC you actually get two things (1) the option to invest in the company they find, and (2) a warrant to buy even more stock. What's even more interesting is that you could actually sell this warrant while keeping the option to invest in the company the SPAC finds.

Not sure I understand what you mean at the end of your comment. If you sell the warrant, you no longer hold the option to buy the underlying stock, do you?

One other point that I don't understand well with SPACs warrants. Once the merger has completed, it doesn't seem like the warrant price really tracks the underlying stock with weird situations where the warrant is priced below intrinsic value. Is there a straight arbitrage to make there or am I missing something?

What's the best way to monitor for new SPACs and when those events happen?

I've been following other boards, but saw this website floating around. Many of them have active excel sheets monitoring which ones have announced

https://spactrack.net

A SPAC has no actual competitive edge in the market. They are literally all hype. As long as the stock market goes up, you probably will make money. But be very careful as if the market turns down, I think these will turn out to be worthless.

To take the other side of this perspective:

The edge is twofold. First, it's a way to pool funding using an exchange rather than getting some bank to underwrite an IPO. Second, many of the people who run SPACs are famous investors who have a track record of success and have greater information and access than most investors.

Given that when a SPACS find a merger target you can chose either to invest in it or get your money back with interest, I'm not sure how the SPAC could ever be worthless.

It's not $10 for every SPAC, different SPACs have different NAVs.

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