What Are Your Thoughts on SPACs, and Are They Good Investments? Ken Fisher Answers

Transcript

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So there's been
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a lot of attention lately to somebody who's been around for a long time,
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but hasn't been very commonly used,
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but now is< which are SPACs. SPAC,
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special purpose acquisition companies. SPACs are a
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little bit of a different kind of a thing where typically people with some
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expertise in a topic go out and raise money in the public market,
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which will then be used within a defined period of time–
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two years of required time period–
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to make one or more acquisitions of privately held companies,
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which effectively takes those privately held companies public.
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The idea is that these people that know a lot about
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their field will be better at making an acquisition
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than not. And that you can pay them a form of
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intrapreneurs markup, to be able to do this. It's,
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it is a form of speculative activity,
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but it's not as crazy as a lot of other
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things, in speculative periods.
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Because typically the people actually do have a lot of experience in
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the realm of which they're trying to acquire. And in doing that,
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they acquire solid companies that some thing that they deemed to be
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reasonable evaluations,
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because they do want to do well in the aftermath of the acquisition,
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their incentive to do well. So it's a, it's a little bit,
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not completely,
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but a little bit like an IPO because a SPAC itself of an offering,
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it's a little bit speculative because a SPAC itself,
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when he raises the money, it doesn't have any other business. There's no air,
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it's all predicated on the notion that they'll be able to do successful
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acquisitions of businesses in some typically specified realm,
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but it's less speculative than the kind of IPO's that we saw,
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for example,
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mostly in the late nineties where you had a lot of businesses
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floating into the public market,
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as a business with no business, all on the common,
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in the hopes that they would be able to do great things they had because they
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had an idea,
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this is the notion that there will be an acquisition typically
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that it will be a reasonable acquisition done by people who know the field of
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somewhat solid businesses. Is it always that, of course not.
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Is it often that? Yes. Is it speculative? Yes.
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Is it the most crazy speculative thing that ever happened? No.
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Is it a sign that the markets are
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getting maybe euphoric is the wrong word,
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Maybe it's just pretty optimistic. Uh, yeah, I think it is.
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Might some of them work really well. Yeah. What I want to do them? No,
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because it's, again, it's a form of a kind of an offering.
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And if you think about IPO's initial public offerings,
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you'll remember words that I used and coined in the 1980s,
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in my
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writings then,
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and the reality is that IPO's in another way,
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it could be said to me,
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and it's probably overpriced and you pay a price for those people to buy
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those businesses, the businesses, otherwise,
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if they want to do could just go public right now.
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And so you're paying a premium and it's probably overpriced,
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but time will tell.