As traditional IPOs continue to decline, another way of taking a company public has taken over: special purpose acquisition companies (SPACs). Also known as a “blank-cheque company,” a SPAC is essentially a shell company that is set up by investors with the sole purpose of raising money through an IPO to eventually acquire another company. While the traditional IPO model can be expensive and time-consuming, SPACs have become an attractive alternative for private companies that are interested in going public quickly and at a lower cost.
Companies are not the only ones interested in SPACs. This unique approach also caught the attention of novice investors, with many rushing to incorporate SPACs into their portfolios. But what should investors look for when selecting the right SPACs for their portfolios? CTV News turned to Sightline Wealth Management Vice President and Investment Advisor Paul de Sousa for insight.
When it comes to building a SPAC portfolio, de Sousa recommends one that is professionally managed by an advisor with excellent deal flow and a conservative strategy. According to de Sousa, the key is the entry price. While most investments can go to zero, a SPAC has a net asset value of $10 and returns investors’ capital if they are not interested in the acquisition.
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