The Key to Success With SPAC Investing
Amanda Heckman|June 5, 2021
Want to increase your profit potential by 40%?
It’s simple to do… if you know where to look.
If you’ve been following along, you know we’re quite excited about special purpose acquisition companies (SPACs). These “blank check” companies use investor cash to find the best private company to merge with and take public.
SPACs have taken off since 2020, giving average investors the chance to finally invest in pre-IPO opportunities once reserved for the rich or well-connected.
We often call them an investor’s dream come true.
But with so many SPACs now on the market (at last count, more than 400 were looking for merger partners), not just any will do. How do you find the ones that have the most potential to outperform the rest?
It all boils down to one simple idea.
It’s the People
When you invest in SPACs, you’re investing in people, not companies. When a blank check company launches… no one knows what company it’ll eventually merge with to take public.
So you need to pay attention to who is launching the SPAC… and take a look at their track record.
As Andy has said, “Many of these SPACs are run by some of the top minds in business. They are teams of financiers with a nose for good technology and a good deal.”
Some people are good… some are bad… and, by definition, most are mediocre.
Experienced, time-tested leaders will attract the most money… and the best pre-IPO companies.
But to get into the SPACs with the biggest potential, you need to know this…
Some recent research from the McKinsey Global Institute has shown that a certain type of leader also brings more success.
It’s not enough to have strong investing chops. The most successful SPACs have been led by former C-suite executives.
According to McKinsey, these so-called operator-led SPACs “behave differently from other SPACs in two ways: They specialize more effectively, and they take greater responsibility for the combination’s success.”
These types of SPAC leaders will put their focus on the areas they know best. That’s smart, given that SPACs have just two years to find a deal. Per McKinsey, “A narrower, more informed search may yield more effective sourcing, higher-quality diligence, better value-creation plans, and ultimately, better-performing assets.”
Operators also tend to stick around. They may join the board of the post-SPAC company and take an active part in its governance to help ensure the success of the project.
The result? Operator-led SPACs have outperformed the rest of the SPAC market by about 40%.
We have to look at just two of the SPAC sector’s biggest success stories…
Virgin Galactic’s SPAC was led by billionaire businessman Chamath Palihapitiya, a former executive at Facebook and an icon in the SPAC industry. It has doubled in price over the last three weeks.
Or how about the SPAC that brought DraftKings public? That one was led by a veteran of the entertainment industry: Jeff Sagansky, the former president of CBS Entertainment. It was one of the industry’s hottest movers last year.
When it comes to the quickly growing SPAC sector, focus on the right leadership and the opportunities will be clear.
That’s how Andy found his favorite SPAC to invest in for 2021. It’s got the right leadership bringing a revolutionary biotech company public in what could be a matter of DAYS. You need to check this out before it’s too late.
