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 SPACs’ 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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