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🏜️ a mid summer spac desert

a "spac" is a blank check firm – it stands for special purpose acquisition company. it's like a stock, but totally not a stock because it's not a real company (yet!)

• a current example on the market is DWAC

• yes, anyone can buy shares of it, and the ticker itself represents nothing more than a pool of money gathered when people buy into the shares

• so, digital world acquisition (dwac) would eventually use that money to acquire a company or become a legit company

• in this case, it's a "shell" company created by donald trump, for which he's been actively publicizing that it will be the "next big" social media platform (aka truth social)

so, obviously… – this is a unique way (to say the least) in which companies can raise billions without even having to go public as a mature, successful organization, since you can put a spac out under the popular name of trump, shaq, famous private equity investors, etc.

• yes, we’ve come a long way, and unsurprisingly, it’s gotten even easier for billionaires to raise more capital - through spac’s, so that speculating robinhood-ers can gamble and lose a lil’ more

but this past july, things weren't as easy as it used to be.

• for the first time in five years, zero new spac's raised money

• sure, spac’s, added with the pandemic retail trading frenzy, got a hefty boost in popularity

  • march 2021 was the peak when $36b+ were raised in one month only via spac ipo's

• but now, half of the companies that finished spac deals in the last two years are down 40% or more (per wsj)

  • companies are even backing out from previously announced spac deals

imo: it’s only natural that this is happening now

• spac is a risky asset, and appetite for risk in the market in general at the moment isn’t looking too hot

  • quick factors coming to mind are (in no particular order):

  • recession, russia-ukraine giving market uncertainty, rising rates, tighter regulations around spac’s, history of failed spac’s that are just starting to make retail traders realize how bad some of their decisions were, etc.

• which is why in this current economic and market cycle, it’s especially important to park a significant portion of one’s portfolio into a solid ticker with solid financials and not-too-expensive valuation

  • yes, y’all guessed it – an example would be one of my all-time favorite tickers KO (read why here)

i hope this was interesting to y’all!!

tip $2, 5, or 10 :)

💡 something im thinking about

as always, i am no financial advisor! (i am no substitute for professional financial services)

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