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SPACs, or ‘Special-Purpose Acquisition Company’, are the latest investment frenzy as investors ranging from hedge funds to everyday investors, rush to access these speculative assets in the hope that they might be investing in the next Tesla or Amazon..
SPACs are essentially publicly traded companies that have no operations and hold nothing but cash. They provide an easier way for companies to list on a stock exchange to be able to access public investors. This backdoor, coupled with investors’ willingness to take on the speculative investment risk, has created a market that is now being compared to the tech bubble in the early 2000s.
In this month’s commentary we take a closer look at this SPAC frenzy to understand why investors are lining up and to assess who the real winners and losers are.