American investors questioned a new way to make money on the stock exchange “blindly” – through a special type of companies created for the acquisition of other enterprises (SPAC), writes CNBC.
The main function of SPAC is to bring companies to the stock exchange and make them public according to a simplified scheme. SPACs go public on their own through IPOs and thus raise funds from investors. At the same time, they are not active, and until some time the attracted money is kept in a special account.
In the future, other companies are acquired using them, usually startups. Thus, the acquired companies are able to trade on the stock exchange, bypassing the complicated IPO procedure. At the same time, as a rule, SPAC does not disclose in advance which company they are going to acquire with funds raised from investors. They can only disclose the industry or other parameters of their choice. In the future, after the acquisition or merger transaction, investors dissatisfied with the choice of its object may demand the buyback of their own shares.
Since the beginning of the year, there has been an increase in SPAC quotes, but at the same time, many investors began to play down, opening short positions: selling SPAC shares, which they do not own in the hope of redeeming them back at a lower price in the future. Currently, the total volume of short positions opened on SPAC is $ 2.7 billion, up from $ 765 million at the end of 2020.
Analysts explain the behavior of investors by the rise in prices of most SPACs. Traders, they said, believed that there was a risk of an imminent fall, by analogy with the shares of GameStop, whose quotes were rapidly changing under the influence of participants on the Reddit forum.
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