Jump to content

SPACs as Cash Alternative with Upside Optionality


Recommended Posts

Stupid question, but you're only allowed to redeem for NAV the SPAC units with the warrants still attached, right?  So the shares trading without the warrants attached have no such rights and will automatically be converted if a deal is approved?

Link to post
Share on other sites
  • Replies 80
  • Created
  • Last Reply

Top Posters In This Topic

aws, the answer to your question is "no", you can redeem for trust value after separation. the shares trading without warrants have those rights and will not automatically be converted. 

In other news, I bought a little RACA today. post-DA SPAC at $9.9 "mid 2021" close. biotech thingamajig that at one time market liked a lot. 

base case: make 1%

bull case: make more than 1%

Link to post
Share on other sites

Oh, interesting.  Thanks, I'll definitely have to look more into this then as I saw quite a few post deal SPACs with the warrants separated trading under $10. At this point trying to play for pops only didn't seem too attractive with the SPAC market so oversaturated, but finding deals returning 1-2% in a couple months is.

Edited by aws
Link to post
Share on other sites
  • 3 weeks later...

It looks like with the selloff this week that some SPACs will be a nice place to park some excess cash. I see many are selling off into the 9.70-9.80 range, and will conceivably go much further if the selloff gets worse even though it should have little impact on the value to a redeemer. I had a couple more questions to make sure I understand what I'm getting into with the strategy of post deal announcement SPACs trading under $10:

1. Are redemption deadlines always before votes on the merger? That is, do you get your money back automatically before the vote happens, in case the vote fails and your money could be locked up longer?

2. What's the worst case scenario if you buy a SPAC below $10 with the intention to redeem, assuming you are never able to sell at a profit before then? Is it something like your money is locked up for two years and there are potentially a few pennies per share of expenses so you get back a little less than $10 face value?  There's never any chance of a major loss (beyond opportunity cost), right?

So for RACA for example, is the worst case scenario that somehow the merger is called off and instead of being able to redeem in mid 2021 you have to wait until possibly the SPAC expires in July 2022?

Link to post
Share on other sites
7 hours ago, aws said:

It looks like with the selloff this week that some SPACs will be a nice place to park some excess cash. I see many are selling off into the 9.70-9.80 range, and will conceivably go much further if the selloff gets worse even though it should have little impact on the value to a redeemer. I had a couple more questions to make sure I understand what I'm getting into with the strategy of post deal announcement SPACs trading under $10:

1. Are redemption deadlines always before votes on the merger? That is, do you get your money back automatically before the vote happens, in case the vote fails and your money could be locked up longer? Redemption deadline is typically two days prior to the date of the special meeting, but occasionally can be subject to being a record date holder which will be set in the proxy materials. The prospectus will state whether or not redemption is conditioned upon being a record holder or simply making the election ahead of a certain date. If you vote to redeem and the merger vote is voted down, you will still get your money back. The trustee has ten business days to get your money to you following the special meeting. 

2. What's the worst case scenario if you buy a SPAC below $10 with the intention to redeem, assuming you are never able to sell at a profit before then? Is it something like your money is locked up for two years and there are potentially a few pennies per share of expenses so you get back a little less than $10 face value?  There's never any chance of a major loss (beyond opportunity cost), right? Yes it is the opportunity cost and potential expense friction. You will not face major loss beyond fraud. 

So for RACA for example, is the worst case scenario that somehow the merger is called off and instead of being able to redeem in mid 2021 you have to wait until possibly the SPAC expires in July 2022? Yes, likely 

Please see bold

Link to post
Share on other sites

Excellent, I snagged shares in a few of them this morning when they were selling off hard premarket. Seems like you can't go too far wrong buying in the 9.70s unless you sleep through a redemption window.  Should be perfect for me since I am holding a lot of cash right now which is only mine for a year, and trying to get a little yield on it while I can.

Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.




×
×
  • Create New...