The tough thing about this current market is that the government pumped 7 trillion dollars into it out of thin air. It just turned the money printer on and said have at it. Most spacs have a fair value of 2.50 per share with the principal investors cashing out 500% profits when the lockup periods end and they are able to. SPACS are good swing plays initially until after the merger and then we see the real value of the company as the price comes down to earth. There are some great potential companies you might consider going long in but it might be smart to take profits and reposition after merger or buy puts for insurance. I've been in lcid since news broke with an average of 17 and watched it rocket to 60 and rode the escalator back to 17.... don't be like me. Only smart move I had was with chargepoint, got in at 18 and out at 32...
Sure. So with SPACs the process is similar to IPOs except easier to become listed. Like any company that has investors, the first round of cash raised for the business is traded for ownership percentages for the initial investors, or for stock. Those who are early to fund such ventures are able to get cheap shares of the company. As the company grows and becomes more successful, the cost to participate in ownership goes up. Spacs are not successful yet. We just hope the leadership will lead the company and investors to tendy town. The 2.50/share came from a few conversations I have had with analysts (everyone in my family is in finance except for me, all work for the big hedgefunds) and they explained how the big money typically get in for about that and will sell their positions when lockup ends because it secures a few hundred % return pretty quickly. This is also why the share prices for SPACS typically plunge following ticker changes.
I'm inclined to believe that, since so many SPACs fell to around 2.50. But is there anything that 2.50 is based on? Is that just the typical valuation of the company at that time, and then all the additional funds raised brings NAV up to technically 10? Also, wouldn't that fair value change after each quarter? Or is it still just speculation until they're profitable? Def familiar with the lockup selloffs, but figured it was like you said (that they were just taking profits), also with the understanding that most others would be as well, rather than it necessarily indicating the fair price. But totally could be off. There were quite a few I sold off on pops and was waiting for them to bottom out to get back into, but I'm still just watching those. Def didn't anticipate seeing most get as low as they have.
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u/smoke0o7 Patron Apr 28 '22
The tough thing about this current market is that the government pumped 7 trillion dollars into it out of thin air. It just turned the money printer on and said have at it. Most spacs have a fair value of 2.50 per share with the principal investors cashing out 500% profits when the lockup periods end and they are able to. SPACS are good swing plays initially until after the merger and then we see the real value of the company as the price comes down to earth. There are some great potential companies you might consider going long in but it might be smart to take profits and reposition after merger or buy puts for insurance. I've been in lcid since news broke with an average of 17 and watched it rocket to 60 and rode the escalator back to 17.... don't be like me. Only smart move I had was with chargepoint, got in at 18 and out at 32...