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The reason SPACs work has nothing to do with hype. People hype shit on the Internet all the time. There's no insight here.

One reason SPACs work is that Apple, Google, Amazon, Facebook, Berkshire Hathaway and (to a lesser extent) Microsoft are sitting on huge cash piles and not doing acquisitions. For almost a decade. So of course high quality mid-caps are going to be "cheap." So while I appreciate your appeal to stuff that isn't fundamentals, it seems like the imbalance between supply of midcaps and demand for acquiring them would be an opportunity.

Legitimately confused by this claim. These companies all do tons of acquisitions

Honey, for example. It would have been a great SPAC target. PayPal acquired it - PayPal is unusual in acquiring companies with 1-10b valuations. There is opportunity there.

Microsoft last bought LinkedIn - for $22b in cash and stock, that one acquisition is really expensive and definitely not “midcap.” NVIDIA got ARM for $12b cash, $21.5b stock. Also huge.

Facebook is really interesting in this regard because its multi billion acquisitions - Instagram, WhatsApp, Oculus - all had finance people saying they overpaid. Maybe they did overpay! In the sense that if those companies SPAC’d instead, the price the vehicle would pay would be lower - not in some subjective sense if those were or were not good acquisitions, they obviously were.

So if I had the opportunity to bid against Facebook for Instagram or against PayPal for Honey, I would! SPACs let me do that. The curious thing is that Facebook isn’t bidding on those companies anymore - Snap said no and TikTok isn’t possible - so... does that mean Instagram would have been cheaper? That would have been an amazing opportunity.

Otherwise we’re talking about smaller acquisitions. For example, Apple bought a lot of companies that probably chose acquisition because they would have been microcap IPOs and thus not tradable by Robinhood users - and maybe that’s really the flip side of this.

That's from a business perspective. I'm talking about from an investing/speculating aspect of them. One of the reasons why SPACs have become so popular among retail investors is because of hype on social media around them.

You're right midcaps are unfavored and cheap. They are in fewer indices and funds tend not to benchmark against midcaps.

But I don't think this has anything to do with cash piles at large cap firms.

>but no one cares about that long-term

indeed. and i congratulate you on your recent success in predicting the tastes of others who buy equities based on speculative price action. spac management likely makes their decisions largely focused on share price, which i suppose as an equity investor would feel like they have your back. but when you consider the role equity is meant to play in corporate finance, you would concede that in an ideal world management would not pay attention to share price at all, they would be working on making the most money possible using the assets and equity they already had, and then either returning or reinvesting those profits. the equity markets will always have a chaotic bent in the short term, so we should be careful of the ways we let them influence policy. its really a circular dependency if you think about it.

It seems you are implying that this sort of arrangement is fundamentally unhealthy for a market focused on accurate price discovery, and I think that's trivially true.

Some investing incentives are aligned with accurate price discovery, some are not (warren buffet vs a pump and dump).

and dont get me wrong, i am glad all types exist and meet in the market.

what i am implying above is that i view a management team that makes decisions based on share price as about as delusional as one that drinks its own urine for power ahead of important meetings.

Dumb question: how do you decide which SPACs to buy if it's before the LOI and you can't figure out what company they will be hyping?

Not OP but have researched a few. If you're following the hype train as OP suggests, management team is really the only thing you have going for you. SPACs have specific rules about what they can disclose, so they won't be able to tell you in advance which company they'll have as a target. Usually it boils down to the industries the management team has worked in before as well as previous SPACs they may have ran successfully till merger.

Look for SPACs close to NAV and plant some seeds. You can almost consider these cash accounts since they won't go much below NAV pre-merger so there is a window of assymmetric risk. Once a target is in place you can do research and decide if you want to adjust. Not everything skyrockets after target is revealed. Canoo and Utz were less sexy plays that paid off and were easily researchable.

If you're just chasing hype, you buy one of Chamath's myriad of SPACs and trust in his ability to pimp himself at every opportunity.

Can you help me understand what this means? A SPAC has a NAV at IPO that then fluctuates. Are you saying to track the NAV and see if the units (or shares?) are close to that value?

You look at the management team and see if they have potential. For example, a SPAC with a "google executive" would be more desirable over some no-name person. Same for the type of companies they're targeting. An industry like electric vehicle would be superior over a spac targeting ed tech for example.

Are you all in on PSTH?

Do you have any tips on good screeners or places to find these SPACs? I've never invested in them yet and don't know too much about them. Are they traded just like regular stocks?

A SPAC is just a stock like any other. If you look for investor videos on YouTube, you'll find the same SPACs being pumped, both in pre-merger and post-merger form. There is also a SPAC ETF ("SPAK") that holds a bunch of them.

Spachero.com

I look for them close to NAV don't like buying much out from there. The current best opportunities I see are, FPAC, TWCT, AACQ. They are priced well and should move when rumours come out. If you want one a little bit riskier but with a potentially sooner payoff, FUSE, rumoured to merge with Money Lion.

If your into options, SPACs with options create some great opportunities for Call Debit Spreads instead of having to buy commons and front the $10 redemption value.

There's also warrants which have more risk. FPAC+ and TWCTW are in my mind the best current warrants.

There is also Units! The best unit play right now I see is COOLU, its due to split soon and you will get one common and 1/3 of a warrant per unit, so buy in multiples of 3.

All of the tickers I mentioned are tech focused and backed by VC firms with a history of successful tech companies and SPACs.

There are a lot of garbage SPACs so you have to be careful.

Overall, your number one source for information should be SEC filings on Edgar. Read the documents there, research the management team, learn what the target payouts are and see who else is buying in.

SPACs are great and should last through the fall, the exchanges are looking at making direct listing much easier though and that will kill SPACs and probably be the move the pops the bubble.

The good thing about SPACs is that you have a focused management team of seasoned investors and you are investing with them and have the redemption price of $10 typically if there is a problem.

Effective strategy. It seems your edge comes from 1. learning about SPACs early and 2. identifying which ones will be successful. How do you get #1?

Look at the IPO calendar. Most IPOs are SPACs.

Is there a good place to get a feed/alert/calendar on LOIs, announcements and merger completion without a bunch of other noise?

This has been my investing thesis on SPACs as well. While it may be obvious to most investors, comments like this that share the idea will make it harder for me to get in early. Selfish, I know.

I don't know how not to make this a personal judgment, but I hate this shit with a passion.

Edit: For the sake of clarity, what I hate is the amount in which influencers and social media impact the market.