Bread And Butter, Not Smoke And Mirrors
Feb 19, 2021
By: Dylan Ratigan
Dylan’s Weekly Notes:
SPACs allow mature, profitable companies to raise money, enroll new investors and help founders cash in on the value they created in the process.
Yes, they are over-hyped, over-valued, and over-used. Yes, they are likely being abused.
But….unlike the SPACs of yore which tended to be scam vehicles for flim-flam operators, the modern SPAC has a few critical gates protecting investors and forcing the integrity of the companies, who ultimately seek to use them to raise money, to clear very defined and difficult hurdles.
The first and most obvious barrier is the simplest and the most important. The SPAC cannot execute the transaction if the shareholders of the new company do not approve of the sponsor’s selected acquisition target in the first place.
So no matter how much hype may exist - before any transaction can happen the SPAC sponsor and the company the SPAC intends to take public must be reviewed and approved by the stockholders.
This simple fact gives the SPAC sponsor and its bankers significant incentive to only transact with real, profitable, growing companies because if the business is not real, profitable or growing, then why on Earth would any shareholder approve the transaction?
In fact, unlike IPOs, the incentive to ensure the company is real is even higher as investors will quickly dismiss any smoke and mirrors style sales stories.
SPACs are a vehicle for real solid businesses to access capital markets and grow. And they may be much better than the old IPO for doing this. SPACs are bread and butter, where so many IPOs are Smoke and Mirrors.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
tastytrade content is provided solely by tastytrade, Inc. (“tastytrade”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. tastytrade, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastytrade is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. tastytrade is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Options, futures and futures options are not suitable for all investors. Prior to trading securities products, please read the Characteristics and Risks of Standardized Options and the Risk Disclosure for Futures and Options found on tastyworks.com.
tastyworks, Inc. ("tastyworks") is a registered broker-dealer and member of FINRA, NFA and SIPC. tastyworks offers self-directed brokerage accounts to its customers. tastyworks does not give financial or trading advice nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastyworks’ systems, services or products. tastyworks is a wholly owned subsidiary of tastytrade, Inc (“tastytrade”). tastytrade is a trademark/servicemark owned by tastytrade.
Quiet Foundation, Inc. (“Quiet Foundation”) is a wholly-owned subsidiary of tastytrade The information on quietfoundation.com is intended for U.S. residents only. All investing involves the risk of loss. Past performance is not a guarantee of future results. Quiet Foundation does not make suitability determinations, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of Quiet Foundation’s systems, services or products.
Small Exchange, Inc. is a Designated Contract Market registered with the U.S. Commodity Futures Trading Commission. The information on this site should be considered general information and not in any case as a recommendation or advice concerning investment decisions. The reader itself is responsible for the risks associated with an investment decision based on the information stated in this material in light of his or her specific circumstances. The information on this website is for informational purposes only, and does not contend to address the financial objectives, situation, or specific needs of any individual investor. Trading in derivatives and other financial instruments involves risk, please read the Risk Disclosure Statement for Futures and Options. tastytrade is an investor in Small Exchange, Inc.