Editor’s Note: Today, we’re featuring a unique point of view on a red-hot corner of the market… so if your time horizon and risk tolerance line up with this high-potential, speculative strategy, take note.
You’ve likely seen that SPACs – special purpose acquisition companies – are quickly becoming some of the biggest movers in the market.
As our good friend Andy Snyder – founder of Manward Press – explains, it’s no wonder why…
Special purpose acquisition companies cut through the expense and red tape of traditional IPOs and give everyday investors access to some of the youngest, most innovative companies out there.
That means – thanks to SPACs – what was once reserved for the rich and well-connected is now open to everyone.
Remember, Wealthy Retirement‘s publisher, The Oxford Club, recommends allocating no more than 5% of your portfolio to more speculative investments, like pre-IPO opportunities.
– Mable Buchanan, Managing Editor
“I hope this is worth it,” the chubby old man said as he stepped off the floatplane and onto the dock.
He flew to Alaska just for the day. He was there to make a deal and didn’t want to waste his time.
Billionaires can get a lot done in an hour… and where we stood, we were an hour away from anything.
For a time in my life, I fished with billionaires and corporate tycoons every August.
I came to feel sorry for the old boys. Misery in a private jet is a very lonely notion.
But I did admire the conversation.
The good ones were honest. They came right out and admitted they didn’t care about niceties.
The others wasted time with small talk… They didn’t care about anybody’s family back home or their holiday plans.
They were there just for the deal.
More Than a Wallet
Being a part of many of them, Donald Trump was right to speak of the art of the deal. Not everybody has what it takes to make both sides happy when millions – or billions – are being tossed around.
The billionaire who flew to me for the day was certainly a tough one to please.
But I learned over the years, dealmaking is not just about the art of negotiation… it’s also about who you know.
That’s the big lesson I took from my time way up north. A big wallet can patch over a lot of crimes, but if your Rolodex is slim… deals won’t be easy.
As grumpy as he was, the man who flew in was well connected. He married into the Walton family. He owned a sports team. And he had a big interest in the world of media.
It wasn’t just his money the fellas who called him were after… it was his connections.
The group he was joining got together once a year. They still do. Every year, they pool their money and their contact list and make deals happen.
It used to be that the average person had no way into such things. They didn’t have the money, the connections… or the private jet to come join us.
That’s not the case these days.
How to Get In
I’ve written about the many ways things have changed. Most notably, it’s the resurgence in SPACs that has changed the game for the average fella.
It’s no secret that deals have been getting bigger and bigger in recent decades. They’re so big that even the uber-rich can’t afford to be involved like they used to.
For a slew of reasons – but mostly regulatory – companies are waiting longer than ever to go public. It means their price tags are much higher once they hit the public market.
Microsoft (Nasdaq: MSFT), for example, made its public debut with a market cap of less than $777 million. More recently, Uber (NYSE: UBER) hit the Street when it was worth $75.5 billion.
The gap is huge.
That trend is one of the leading reasons SPACs have become so popular.
In fact, one of the billionaires who used to join me in Alaska was just involved in a SPAC of his own. He’s worth nearly $8 billion… but that doesn’t go too far when the big-name deals are coming with price tags of $4 billion, $6 billion and more.
He’s a big fish… but the pond is getting bigger by the second.
Take the big news from the SPAC world last week…
Core Scientific is one of the largest cryptominers in America. It has operations in North Dakota, North Carolina, Georgia and Kentucky. It’s completely out of space, though, and needs money.
A decade or two ago, it likely could have gotten all it needed from the private sector. But with Core Scientific’s valuation of $4.3 billion, its best chances are in the public market.
It’ll soon merge with a SPAC and make its shares available to anybody.
It’s a win… and a deal to watch.
The SPAC space is maturing very nicely.
Sure, it got a lot of attention this spring when new deals were announced nearly every day. Back then, it accounted for nearly 75% of all IPOs. But things have calmed down. The space is no longer overheated and now accounts for a much healthier 50% of deals.
We’re in the sweet spot.
SPACs offer a rare shot to take advantage of what I was a part of so many years ago. They allow investors to take advantage of a billionaire’s connections… and invest right alongside them.
Just like that rich guy said as he stepped back onto the floatplane in Alaska with a new deal in his pocket… “The deals are worth it.”
There’s a lot to know about SPACs. I certainly didn’t cover them all.