Comment by skybrian | Hacker News Reader

Comment by skybrian | Hacker News Reader

Due to how SPACs work, investors will be getting most of their money back. Typically they IPO at $10. The money gets returned if no deal is made.

> Concord’s sponsors will throw in the towel and return roughly $10.17 a share to investors, the SPAC said in a subsequent filing. The stock closed at a high of $13 in November 2021 and garnered attention from Wood’s Ark Investment, which is among the SPAC’s biggest investors with about 3.2 million shares, according to Bloomberg data. Her ETFs snapped up 222,800 shares last November, when the stock traded above $11, and bought 278,000 more in February on a day that it closed at $10.37, according to trading updates.

So if someone bought at $13 they lost 22% on the investment, but most probably bought at less than that.

(Not a financial professional; corrections welcome.)

A lot of people park their cash in SPACs at NAV and pull them when a deal is announced (but before the merger). You get the treasury rate (minus expenses) with a chance of a pop if an exciting deal is announced. It really is a +EV situation and if you did that last year you made a ~1.5% ROI as opposed to the -15% of the S&P

Probably Ark's best performing investment of the year

Do they all IPO at $10 price and if so why?

That's standard. I don't exactly know why except that it's a convenient price for retail investors and it lets them re-use their old contracts. The pool of money that they collect at IPO varies a lot, though.

They will structure the deal such that the value of those shares is targeted to be about $10. Seems like they don't always achiever that. One of Chamath's DNA SPACs only started trading recently and is way down: https://www.google.com/search?q=NASDAQ%3A+AKLI

Before the merger goes through the stock price has a floor of $10. Typically the SPAC will IPO and start looking for a deal, this takes around 1-1.5 year. During that time the stock will be trading at around $10. When a deal is announced it typically takes 3-6 months for the merger to complete. The floor is still in place during that time. After the merger goes through the floor disappears and it starts trading like a normal stock.

Always $10, the share price is a complete fabrication so this just became a trend because it’s a nice number that’s easy to calculate %s from and the S-1 math was more standardized.

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