Wisdom Wise
SPACs High Risk, High Reward
Is it advisable to invest in SPACs? SPACs stands for Special-Purpose Acquisition Companies. These companies are actually shell companies with nothing to show. They don't have any track record, any brand name or any asset.
Basically, SPACs are meant to promote private equity investments, spur corporate transformation, and encourage merger & acquisitions.
When you invest in SPACs, it means that you are handling over your money to a team of supposed-to-be professionals who will look for good assets to buy and invest. Obviously, what is most important here is the integrity and competency of the team.
Competency without integrity is worse than integrity without competency. I wouldn't invest in a company that is either the one or the other. The worst is, when there is neither competency or integrity. Therefore, if you are about to invest in SPACs, you must, firstly, make a study of the management team. When you are convinced that the team is skillful and honest, then and only then, you hand over the team your money. Otherwise it is better to avoid them.
One more thing, don't forget that while the team is looking for qualified assets to buy, the company has to pay the team members their salaries. This means outflow of cash without any inflow.
In America, there are more failures than successes as far as SPACs are concerned.
Presently we have three SPACs listed in Bursa. They are Hisbicus, Cliq, and Sona. More shall be coming.
If you are risk-adversed, SPACs are not for you.
Whatever action you take as a result of reading this article is your absolutely responsibility.
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Discussions
3 people like this. Showing 8 of 8 comments
Hibiscus has already graduated from SPAC and are now classified under Industrial Products.
2013-09-28 21:05
Lotusf1...not right...they hv to acquire an assets/company within 3yrs and you all need to approve it in an EGM. If you dont approve it, you get certain amount of money back that is being held in the trust plus interest.
It is totally different from dot-com company. They have a choice to look for assets/company and that new asset/company could be making money also. It is up to them to look for good assets. If you as shareholder feels that is not a good assets, then disagree in the EGM and you got your money back. In dot-com, you put your money in and it could burn off and you cant see the ashes also. So spac is different and that's why they have the word "Special" in it.
2013-09-28 23:39
It will be ' disasterous' if they cant find suitable assets in 3 years....my advice is to invest marginally in SPAC and when they does strike oil,only then igo in 2 nd gear.use other portion of yr intended investment on other well proven assestsor services,manucfacturing players that are alraedy in exisience and making profits..
2013-09-29 06:59
no free lunch in this world. how much you pay how much gain. People buy this kind of share, they should know what they doing.
2013-09-29 10:52
high risk high reward, low risk low reward, if want no risk, put in FD lah. But sorry to say your money value will become small and small.
2013-09-29 11:28
Disastrous???? Not really...no qualifying asset within 3 yrs, you get "some" of your money back. I said "some" because it depends at which point you buy the shares. If you buy Sona said at IPO which is 50sen then 3yrs no qualifying asset you get about 48sen. But if you buy at the low said 38sen, you get 48sen after 3yrs if no qualifying asset. So is this disastrous????? A lot of misinformation are flying on SPACs...so always get the facts right.
2013-09-29 22:47
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Ride The Bull Short The Bear
CS Tan
4.9 / 5.0
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
lotusf1
I do know spac needs to show their worth n profitable within 3 years or,money returned back to investors...
2013-09-28 21:03