Below is a chart and brief excerpt from today's Early Look written by Consumables analyst Daniel Biolsi.
With the increase in SPAC offerings, investment research is needed more than ever. EVs and ESGs are the most popular SPACs, often doubling just based on the sector without any figures. You do not need Hedgeye if your investment process simply consists of buying the next EV or ESG company, but there is good reason to be more discerning when it comes to SPAC investing.
SPACs come with considerably more dilution than traditional IPOs. That dilution tends to come into play in the post-completion phase when hype and projections are replaced with earnings reports and insider selling. The Chart of the Day depicts the dispersion of returns for recent SPACs. The vast majority of SPACs underperform in the latter phase.
SPACs are likely here to stay as long as individual investors are directing their trades. The more democratic IPO process seems to fit with the times. However, the structure will probably have to change in the next cycle to reduce dilution and retain capital.