Personal Wealth Management / Expert Commentary

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

SPAC stands for special purpose acquisition company, and despite SPACsโ€™ newfound popularity, they are not new. Ken Fisher, founder of Fisher Investments, explains that SPACs are unique ventures typically formed by a team of professionals with expertise on a certain topic to raise capital from the public market for the purpose of acquiring private companies which effectively takes them public.

Transcript

0:01
So there's been
0:02
a lot of attention lately to somebody who's been around for a long time,
0:06
but hasn't been very commonly used,
0:08
but now is< which are SPACs. SPAC,
0:12
special purpose acquisition companies. SPACs are a
0:19
little bit of a different kind of a thing where typically people with some
0:23
expertise in a topic go out and raise money in the public market,
0:28
which will then be used within a defined period of time–
0:33
two years of required time period–
0:36
to make one or more acquisitions of privately held companies,
0:41
which effectively takes those privately held companies public.
0:44
The idea is that these people that know a lot about
0:49
their field will be better at making an acquisition
0:53
than not. And that you can pay them a form of
0:58
intrapreneurs markup, to be able to do this. It's,
1:02
it is a form of speculative activity,
1:05
but it's not as crazy as a lot of other
1:10
things, in speculative periods.
1:13
Because typically the people actually do have a lot of experience in
1:18
the realm of which they're trying to acquire. And in doing that,
1:22
they acquire solid companies that some thing that they deemed to be
1:27
reasonable evaluations,
1:29
because they do want to do well in the aftermath of the acquisition,
1:33
their incentive to do well. So it's a, it's a little bit,
1:38
not completely,
1:39
but a little bit like an IPO because a SPAC itself of an offering,
1:43
it's a little bit speculative because a SPAC itself,
1:46
when he raises the money, it doesn't have any other business. There's no air,
1:49
it's all predicated on the notion that they'll be able to do successful
1:53
acquisitions of businesses in some typically specified realm,
1:58
but it's less speculative than the kind of IPO's that we saw,
2:03
for example,
2:04
mostly in the late nineties where you had a lot of businesses
2:10
floating into the public market,
2:12
as a business with no business, all on the common,
2:16
in the hopes that they would be able to do great things they had because they
2:19
had an idea,
2:22
this is the notion that there will be an acquisition typically
2:26
that it will be a reasonable acquisition done by people who know the field of
2:31
somewhat solid businesses. Is it always that, of course not.
2:35
Is it often that? Yes. Is it speculative? Yes.
2:39
Is it the most crazy speculative thing that ever happened? No.
2:42
Is it a sign that the markets are
2:47
getting maybe euphoric is the wrong word,
2:50
Maybe it's just pretty optimistic. Uh, yeah, I think it is.
2:55
Might some of them work really well. Yeah. What I want to do them? No,
3:00
because it's, again, it's a form of a kind of an offering.
3:04
And if you think about IPO's initial public offerings,
3:09
you'll remember words that I used and coined in the 1980s,
3:15
in my
3:19
writings then,
3:23
and the reality is that IPO's in another way,
3:28
it could be said to me,
3:29
and it's probably overpriced and you pay a price for those people to buy
3:34
those businesses, the businesses, otherwise,
3:37
if they want to do could just go public right now.
3:41
And so you're paying a premium and it's probably overpriced,
3:45
but time will tell.

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