Investors Should Be Wary of SPACs. Also Red Sox Fans.
The appeal of so-called blank check companies to their sponsors and private businesses is clear. What’s in it for ordinary investors is less obvious.
SPAC fan.
Photographer: Maddie Meyer/Getty Images
Every few years, investors seem to become enamored with one investment or another. In my adult lifetime, it started with internet companies in the late 1990s, then residential real estate in the mid-2000s, and more recently cryptocurrencies and pot stocks. It always ends the same way, with investors rushing in to get rich only to stumble out disappointed or worse.
Enter the latest obsession: so-called blank check companies, formally known as special purpose acquisition companies, or SPACs. In a sure sign that investors are on the chase, a new exchange-traded fund, the Defiance NextGen SPAC Derived ETF, now offers one-trade access to would-be SPAC investors. It follows a gaggle of big-name figures who are launching SPACs to cash in on the craze, among them hedge fund billionaire Bill Ackman, former U.S. Speaker of the House Paul Ryan and Oakland A’s executive Billy Beane, whose SPAC is reportedly in talks on a deal with the owner of the Boston Red Sox.