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De-teasing Manward’s “#1 pre-IPO investment for 2021”

What's being teased by Manward's new Venture Fortunes? (Plus, a little primer on SPACs)

Today we’re sniffing out some teased picks by Andy Snyder that were hinted at in ads for his new “upgrade” newsletter at Manward Press. It’s called Venture Fortunes, and theoretically has a $5,000 sticker price but is being launched at $1,975 for the “charter” subscribers, who also get two years (“list price” in these kinds of letters exists just to get you to think that you’re getting a bargain at $2,000 for some investment research… though they do, to their credit, offer a refund for folks who test the product for a full year and are disappointed, now sadly a rarity for the “upgrade” newsletters that generate most of a publisher’s profit).

And the idea with this Venture Profits newsletter is to “get in early” on hot stocks and IPOs, which is, of course, a hugely popular idea… particularly among newer investors who think they’ve “missed out” on past growth stocks. He even teases a “back door,” which is a popular metaphor for a sneaky way to invest in a hot idea — and that, of course, makes it feel more justifiable to pony up a huge price for a newsletter, because you’re getting access to something “secret” (wait behind the velvet rope with the peons? Forget it, dude, I’m using the VIP “back door!”)

None of this will be all that “secret” to most Gumshoe readers, since you’re so smart and well-informed already (and lest I forget to mention, looking really sharp today!), but let’s see how he pitches this… the ad is staged as an “interview” with a newsy-type person, Corrina Sullivan, who is one of the huge flock of freelance former TV news reporters and anchors whose TV-ready personalities make the world of promotional “interview” presentations and corporate videos seem somehow reassuring and familiar. Here’s a bit from the infomercial, in Snyder’s words…

“… with the back door I’m going to talk about today, anybody can get into the hottest pre-IPO opportunities, usually for around just $10…

“Today, I’ll explain how this back door works so our audience can decide for themselves whether it’s right for them.

“I’ll give everyone watching details on my #1 pre-IPO investment for 2021.

“And I’ll also share the details behind THREE MORE little-known pre-IPO opportunities.

“Each of these companies plays a key role in developing new technologies that are changing our world.”

And it will come as no surprise that what he’s really talking about here are SPACs

“I believe the success of Virgin Galactic’s SPAC fundamentally changed the IPO market.

“And it started the SPAC revolution in 2020.

“As Jack Ablin, the chief investment officer of $12 billion investment fund Cresset Capital, says…

‘It’s an easier and often cheaper way for private firms to go public.’

“After Virgin Galactic went public and proved startups could bypass the Wall Street machine, the number of SPAC deals took off…”

That’s certainly true, though the market has cooled off dramatically now — for six months or so, from last Fall through February or March, anything related to SPACs seemed to be soaring as investors got excited about the next big deal and the idea of buying “pre-IPO” companies. Those Special Purpose Acquisition Companies (SPACs — more on that in a moment if the idea is new to you) have raised giant pools of capital in their “blank check” listings on the stock market, and are looking to invest that money by merging with private companies to take them public… which, depending on who you talk to, is either a democratization of the IPO process or a way to further fleece novice investors.

Snyder goes through the basic idea of SPACs, which we’ll skip for the moment, but the basic backdrop is that hundreds of those SPACs are out there, with billions of dollars burning holes in their pockets (if they don’t buy something, they have to give it back — which is the LAST thing a SPAC manager wants to do), so they’ll be making deals right and left over the next couple years… Snyder’s new high-end newsletter, like many others from most publishers, is trying to take advantage of that buzz and promising to try to recommend the best plays on this group of new-to-the-market companies.

Which ones does he like? We do get a tease for his favorite, along with three others, so we’ll put the Thinkolator to work, get some names for you, then you can research and decide for yourself, without a $1,975 impulse purchase of a newsletter clouding your judgement. Here’s more from the pitch:

“Our strategy is to purchase SPACs planning to merge with companies you want to be invested in….

“… it’s an easy decision to invest in SPACs because…

  • You need only a small amount of money.
  • If the SPAC doesn’t go public, you get your $10 back.
  • SPAC pre-IPO profits come in a fraction of the time that regular pre-IPO profits take.
  • And you can do it over and over and over again.”

Snyder also tells us what he looks for in these SPAC deals…

“There are three main boxes I like to check.

  • I want to see quality backers and management.
  • I want the company to be set up for big growth in a huge market.
  • I want to see that the company is a first mover in its market.”

The examples of past deals he thinks meet those criteria is a nice cherry-picking of a few of the most popular SPAC deals in the last year, including Luminar (LAZR), AppHarvest (APPH) and QuantumScape (QS)… but what’s his favorite “#1 pre-IPO investment” right now? We finally get into the clues…

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“I’m recommending people buy a SPAC that could merge with a genetics company in the coming weeks.

“But this isn’t a normal SPAC…

“It’s funded by the guy who started this revolution in the first place… billionaire and founder of Virgin Galactic Sir Richard Branson.

“He says this genetics company is ‘absolutely transforming drug discovery.'”

And a few other clues we can feed to the hungry Thinkolator…

“This company is the first mover and market leader in the field of genetic testing.

“It has 8 million separate, individual genomes sequenced….

“The personalized medicine market size is expected to reach $3 trillion by 2025.

“And this single company is by far the market leader.

The Wall Street Journal reports that it has ‘a pipeline of more than 30 therapeutic programs, spanning oncology [as well as] respiratory, cardiovascular and other diseases.'”

And apparently it’s still trading at roughly the initial SPAC price, which means investors are not super-lusty about the idea at the moment (this is true of a lot of SPACs — anyone with a deal announcement saw their price soar during the high times a few months ago, but investors have grown more cautious of late) … and, of course, we have the “urgent” message that all newsletter ads are required to include (if there’s no rush, why would I pull out my credit card RIGHT THIS SECOND and spend $2,000?)…

“But to be very clear: There’s serious urgency right now to get in.

“The company could go public in the coming weeks… if not days.”

That’s one you might well have heard of before, it’s Anne Wojcicki’s 23andMe, which is in the process of merging with Richard Branson’s VG Acquisition SPAC (VGAC) and, assuming the deal is consummated as planned, will mean that VGAC changes tickers to ME, probably within the next month or so.

23andMe started life as the first high-profile “check your DNA” company almost 15 years ago now, and has been through a few upheavals in that time — originally they wanted to provide preventive DNA-based health screening to consumers as genetic sequencing dropped below $1,000 a pop, but the FDA cracked down on that so they became more of an “ancestry” tracking company for a while, effectively competing with Ancestry.com’s DNA spit test to track your lineage and find relatives, and then as the years passed they gradually got FDA approval for some health-related DNA testing (for six “predispositions” so far), which led to a partnership deal with GlaxoSmithKline (GSK), and they’re also trying to harvest their library of DNA info to help create medicines, the first of which they licensed out for possible development last year.

So far that’s at an extremely early stage. They have built a large library of genetic data and most of their customers have opted in to having their genome used for research, with many of them also submitting survey answers to build on that data and staying engaged with the platform, so they are trying to mine that data for insights and possible drug targets or other health information, which could create value for the company and for shareholders.

Their first step to do this in the near term is by building a subscription product for DNA-interested consumers, which is what Wall Street typically loves (recurring revenue is the best kind of revenue), but the larger potential gains are probably from drug development — including their lead compound, a CD96 inhibitor, which is progressing through a Phase 1 trial with GSK right now. It’s going to take a long time to play out, they’re going to use this SPAC fundraising ($500 million from the SPAC, assuming no redemptions, plus $250 million from the PIPE deal) to try to goose their growth by increased marketing for customer acquisition and fund their clinical trials and drug development (the GSK partnership is 50/50, so they shoulder some cost, and they have several of their own targets to work on as well), but even if they get the roughly 20% revenue growth they’re forecasting for the next several years they’ll still be unprofitable in 2024. The market cap at $10 a share, again assuming no redemptions, is going to be about $4.4 billion, with almost a billion of that in cash. You can check out the original investor presentation for the SPAC deal here if you like.

And if you’d like a few more ideas to peruse, we’ll check out the “bonus” teases as well… Snyder says these are the focus of his “3 SPACs to Ride the $300 BILLION IPO Wave” special report…

“1. The Next Tesla

“The first company is in the massive electric vehicle space.

“It’s introduced an all-electric sedan with a 400-mile range, a top speed of more than 200 mph and a zero-to-60-mph time of less than 2 1/2 seconds…

“It’s sold out of ALL of its $170,000 vehicles, with reservations topping 8,000….

“I believe the company will soon be a major rival to Tesla.

“If fact, the company’s CEO is the former vice president of engineering at Tesla.”

That’s Lucid Motors, which was one of the more enthusiastically received SPAC deals when it was rumored that Churchill Capital IV (CCIV) was in negotiations to take Lucid public — no surprise, given the very direct comparison to Tesla (TSLA) (the Lucid Air looks like the next generation of the Model S) — but then collapsed when the details of the deal were announced (for a little while, in February, CCIV speculators were paying $60 a share for CCIV, based on rumors and non-specific reporting alone, for the chance to get in on a deal that would mean they were paying 6X what the experts were expecting it to be worth), so now the SPAC, which is still expected to close at some point, is trading at about $24 a share. The deal was so popular, and in such a hot sector, that the institutional investors who were brought in paid a premium, too, agreeing to a PIPE financing at $15 a share, which is very unusual (usually the PIPE investors get to buy in at the same $10 per share the SPAC originally was valued at, regardless of how the shares react to the news of a deal).

If Lucid gets a Tesla-like valuation maybe this will work out fantastically over the next five years as they get production ramped up and introduce new models… but it took Tesla a long time and a lot of showmanship and overpromising from Elon Musk to get them to this point, now about ten years since the Model S was introduced, and if it weren’t for Musk’s cult of personality and the bigger mission that has attracted so many investors they could easily have blown up along the way. Lucid is starting out with a lot of optimism and a lot of cash, and is clearly following very directly in Tesla’s footsteps, but they also haven’t delivered their first production car yet (plan is for the first delivery to be later this year)… and scaling up an auto company and building a new consumer brand is a lot harder than Elon Musk makes it look. If you’d like to start learning about Lucid, their analyst day presentation from last month might get you started on sipping the Kool-Ade.

Next?

“2. Bigger Than Bitcoin

“The second one is a new tech company focused on the booming cryptocurrency market.

“Obviously, this is one of the fastest-growing markets….

“It’s created the very first fully federally regulated cryptocurrency exchange, including futures and options.

“Its single purpose is to take cryptocurrencies mainstream by giving institutional investors a stable, liquid exchange…..

“And it has the power to do it…

“This company is backed by none other than the New York Stock Exchange.”

That’s Bakkt, which is going public through a planned merger with VPC Impact Acquisition Holdings (VIH)… and yes, that includes a $50 million PIPE investment from Intercontinental Exchange (ICE), which owns the NY Stock Exchange and was already the controlling investor in Bakkt (with 81% ownership). This will no doubt be a volatile one, since it will be driven by cryptocurrency interest, but they do foresee reaching positive cash flow in a couple years.

This is obviously a hugely competitive sector right now, with every company trying to get a toehold in what they believe will be the new world of blockchain-enabled financial services and cryptocurrencies, and Bakkt has some interesting ideas about aggregating lots of non-cryptocurrency digital assets (like airline miles, video gaming points, rewards programs and stocks in addition to cryptos). I have no idea how it will work out, but the ICE involvement is a good endorsement for getting institutions on board… and clearly there’s consumer demand for simplifying digital assets, and their integrations with big banks and consumer brands (Citibank, Starbucks, etc) offer some promise. Their SPAC presentation is available here. And yes, VIH shares shot up to the high teens on the initial deal announcement back in January, but are now trading right around $10, which if the merger goes through as expected, with no SPAC redemptions, would mean a market cap of about $2.6 billion for Bakkt.

The business is not terribly impressive yet, with their cryptocurrency trading platform not yet in the results for 2021, but, like all SPACs, they’re trying to pitch the business based on 2025 financials… which, of course, sound impressive. In the immediate future, which has some possibility of being predictable, they expect to reach $55 million in revenue this year and lose about $200 million to get there, with next year bringing a truly explosive step-up in growth to $224 million and a loss of only $20-40 million. What the odds are of that coming to pass in 2022, and of growth continuing beyond that, I don’t know, so I’ll just say that if they can reach that milestone next year, and if cryptocurrency prices don’t collapse completely and cause investor interest to disappear, then the $2.6 billion market cap might be justifiable — that would be about 10X 2022 revenues, for a company that thinks it can grow revenues at 75% a year. It’s important not to put too much weight on those projections, aggregators of loyalty and miles programs have failed before, the easy crypto “on ramp” companies like PayPal, Square and Coinbase have a huge head start on them, and Bakkt doesn’t know what 2024 will look like any more than you do and there are a lot of moving parts with their different planned collaborations… but it’s at least a nice goal for them to shoot for.

And one more….

“3. The Amazon of Finance

“It’s backed by arguably the most successful SPAC backers in the market – Social Capital.

“This firm backed Opendoor, where SPAC investors could’ve seen a 216% gain in nine months’ time.

“It also backed the Virgin Galactic SPAC…

“… this company’s goal is to become a one-stop shop for financial services… from personal and home loans to small business financing to crypto and stock investments.”

That’s SoFi Technologies (SOFI), the only one of these which has officially completed its SPAC merger — and yes, it came public through one of the Social Capital Hedosophia SPACs launched by Chamath Palihapitiya, who has become either the Crown or Clown Prince of SPACs over the past year or so, depending on your perspective. They started life as a different kind of lender, using social data instead of credit scores to underwrite student loans and other lending programs, but they’ve grown more generic since those early days, with lots of different financial products, and are aiming for that “all things financial” app experience, competing with giants like PayPal and Square and Intuit and lots of others. I honestly can’t get my head around this one, but it’s got a decent starting position in a huge market — you can see their investor presentation here if you’d like to start learning about their goals.

I expect there will be a pretty large number of “washouts” in the SPAC space, as SPACs who overpaid for their target companies in a burst of enthusiasm over the past year come to the same kind of crisis that hits regular IPOs in their first year… insider selling after the lockup period, combined with a loss of enthusiasm for the story as reality sets in, may bring down the share price to something more attractive (or even rational) in some cases. There are so many of these that we’ll miss a lot of them, there are dozens of SPACs looking somewhat urgently to close a deal within the next six months or so right now, and hundreds of them that will begin to feel pressure to consummate a deal over the next 12-18 months as the ludicrously large crop of new SPACs that were launched in the first couple months of this year fights for the scraps. Should be an interesting story to watch over the next few years to see if the SPAC craze becomes the new way that smaller companies go public, or if it washes out and we go back to the world as it was in 2015, when SPACs existed but were oddball investments that nobody took very seriously. I had more fun with SPACs and warrants in the years before the SPAC mania took hold, but this mania and/or revolution has, at least, reinvigorated the small cap IPO market, and I expect that will give me plenty of new teaser stocks to write about in the years to come.

What are SPACs? If you already understand what’s going on with this strange fundraising vehicle, you’re done for the day and you can skip ahead to share a comment below…. if you don’t get the whole idea, here’s the basic explanation of SPACs that I’ve shared before, back when I was looking into Bill Ackman’s SPAC and the Yellowstone Acquisition SPAC (YSAC) for some previous reader questions (I own shares of both Pershing Square Holdings and Yellowstone, for disclosure’s sake):

A Special Purpose Acquisition Corporation (SPAC) is often called a “blank check” company — these are companies that go public in a regular IPO, raising money from the public on the strength of some internal and institutional sponsorship and a vague notion of what they might do with the money. That sounds inherently risky, and it is, so to make it palatable and less likely to screw over investors who are putting money into this pool of capital with no promise about what might happen to it, there’s both a sweetener and an escape hatch:

The escape hatch is that the SPAC sponsor has a set amount of time, usually two years, in which to find a use for the capital that they control, which is tied up in a trust fund — typically, that means they leverage both of the SPACs assets (their public listing and their pool of cash) to take a private company onto the public markets (or sometimes more than one company, as when what became DraftKings was formed from DraftKings, the gambling tech company SB Tech, and the Diamond Eagle Acquisition SPAC). The “escape hatch” opens when that deal is consummated — shareholders of the SPAC get to vote on the deal, which gives them some power, but, more importantly, they also get the right to redeem their SPAC shares for their portion of the trust fund at the time the deal is done instead of participating in the deal, and if no deal is ever found that trust fund gets distributed back to all SPAC shareholders. That trust fund’s value to shareholders is essentially the $10 per share that almost all SPACs start out by raising (there are occasional exceptions), plus a tiny bit of interest… the estimated per-share redemption value is usually disclosed in filings along the way to keep shareholders updated (Pershing Square Tontine Holdings launched with a $20 per share trust fund, Yellowstone started with $10.20 in their trust fund).

And the sweetener is warrants. Each SPAC goes public initially as a stapled unit, typically with a U at the end of the ticker (so in the case of Yellowstone Acquisition, it is YSACU). That unit includes one share of equity, which is what can be redeemed at the time of deal consummation or if no deal is found before time is up, and usually a portion of a warrant. There is no rule that says all SPACs have to be identical, but in general each unit will have one warrant if the manager is not well known enough to easily raise capital, or a portion of a warrant (a half, a fifth, it varies) if that’s all that’s needed to get attention (like if they have a strong brand name with investors, like Pershing Square or Social Capital). After a month or so, the Units can be separated at the investor’s option, and they will begin trading separately as regular equity shares (YSAC in this case) and publicly traded warrants (YSACW). SPACs are the source of most of the publicly traded warrants that exist in the markets these days.

A warrant is essentially like an option, with a few key differences. They are individual securities, they are not standardized, so you have to pay attention — but almost all the time they are five-year warrants (starting from the date the SPAC makes a deal) that give you the right to buy the underlying stock at $11.50 a share, so that’s kind of like a long-term call option… with the leverage somewhat limited because there’s typically an early redemption right at the company’s option if the shares trade above a certain level (usually $18 for 20 days out of 30). Warrants require active attention, because they do not get exercised automatically by brokers like stock options do — so they can expire worthless even if they should be “in the money” and valuable, and that’s particularly true if the share price soars to that $20+ neighborhood and the company chooses to redeem the warrants early, if you don’t exercise them or sell them before redemption the company can seize your warrant for a penny (depending on the specifics in their prospectus) and you’re out of luck. Watch your mail and broker notifications about corporate events, and watch your SPACs.

The fractional nature of warrants sometimes gets confusing, too, so make sure to pay attention to the filings and understand, in each case, how many warrants are attached to your SPAC units, and what the exercise terms of the warrants are — sometimes a warrant is effectively for a half share, for example, so it requires two warrants plus $11.50 to exercise, and there are many different permutations out there that impact the value. Most of them follow the same basic structure, but, like snowflakes, no two are exactly alike. If you don’t want to read SEC filings, SPACs are probably not for you.

A few other things to note: If you buy a SPAC unit (with the U on the end of the ticker), you’re buying what originally went public, including whatever warrant(s) are stapled to that SPAC share. If you buy after the split, and buy YSAC instead of YSACU, you don’t get any right to that warrant. Once the units split you can also buy just the warrant if you prefer, which, to continue the Yellowstone example, most brokers will report with ticker YSACW (or YSAC/W or YSACws or some similar notation).

If you wish to use a SPAC as a low-risk option on a possible future company combination, as many institutional investors do, then the redemption value is critical. If you buy SPAC units at $10 a share, you’re taking very little risk because of the redemption right, it’s just that your money is “tied up” to some degree (you could always sell your SPAC units, of course, but at the market price, which might not necessarily be as high as the full redemption price).

If you pay meaningfully more than $10 per share for a SPAC share (the regular equity, so YSAC in this case), everything above $10 is your speculation on what company the SPAC will merge with, and how successful they’ll be. If you pay very close to $10 a share for the original SPAC units (YSACU, in this case), then you are essentially getting all the leverage for free. You will have a redemption right that hits within two years that will almost certainly be for very close to $10.20, perhaps a little higher, so you get to know that you have the option to participate or not participate in the deal at that point… but you also get the warrants as a free option on that future potential.

Nothing is guaranteed like Treasury Notes or a bank account are guaranteed, but I’m not aware of any SPACs that have blown up, due to fraud or anything else, and not paid out their redemption value. That’s why hedge funds love investing in SPAC IPOs — no downside if you hold until the redemption date, possible meaningful upside from the equity or the “free” warrant (many just do an arbitrage to get a small return plus free warrants — buy the SPAC units with the intent of redeeming, effectively just getting the cash-like return to the redemption date and also earning some free warrants at the end, while also maybe getting lucky if investors bid the SPAC up for some story-driven reason along the way).

Who pays for all of this? The founding sponsor of the SPAC who originally takes it public, and who also reaps a huge portion of the reward. In exchange for buying founders shares or founders warrants that are not redeemable (or publicly traded), and which essentially cover the cost of operations for the two years that they spend looking for a deal, they get a huge chunk of the equity in the new company that is created out of the SPAC when a deal is done (usually 20%, though sometimes it’s adjusted down to make a deal work)… and if a deal is not done, they eat those costs and generally get nothing. It’s a bargain for them, their initial investment in getting this set up and buying those founders warrants or getting that free future share is often just $25,000 or so, total, for a SPAC that could raise maybe $200-500 million (some founders invest a lot more into their SPACs than that, but many don’t).

That is the primary problem with SPACs — the SPAC founders get outsize rewards, and to earn those rewards they are highly incentivized to make a deal, which means that during a time like this when there are SO MANY SPACs out there seeking deals, the edge goes to the seller of those companies, not the buyer. That’s not necessarily true in each specific deal, but it’s certainly true for the “hotter” names that are out there, like the well-known venture-funded technology companies, so those private owners are sometimes getting awfully good deals from these SPACs.

Other important things to note? The “escape hatch” redemption clause is not perpetual — you get to exercise your right to redeem your shares for your portion of the trust fund only at the point when a deal is made or the point that the deadline (usually two years) expires. If the deal is not easy or quick to close and the deadline is about to be reached, then most SPACs have an automatic extension right of a few months, or can go back to SPAC holders and ask them to approve a longer extension, but the extension itself is the second trigger for redemption — if they ask for an extension, they can have it, usually automatically and without a vote, but you also get the right to redeem for your $10 or so instead of leaving your capital in the pool for that extended period. You usually get a set amount of time in which to exercise your redemption option, it won’t be very long, so do pay attention to whatever notification you get — those redemption requests would typically be placed through your broker, and may incur a fee from the broker for doing that work.

Traditional SPACs are pretty ugly when it comes to egregious compensation for the founders, which is one reason why they have historically not done terribly well as investments after the SPAC deal has been struck (recent “story stock” victories like Virgin Galactic and DraftKings notwithstanding), so I would never argue that they’re a good deal as an asset class — but I still think there are occasional interesting deals in SPAC mergers, and that buying a SPAC at the IPO price remains a pretty easy “free option” if you have cash lying around.

There was a good story on Bill Ackman’s SPAC in Institutional Investor a little while ago, here’s a little excerpt about that compensation issue:

“One of the things SPACs have in common with other forms of asset management — specifically alternative asset managers — is the outsize compensation for their founders.

“‘SPACs are a compensation scheme, like people used to say about hedge funds, but it’s even worse,’ Ackman tells Institutional Investor. ‘In a hedge fund, you get 15 to 20 percent of the profit,’ he says, in reference to the incentive fees hedge funds earn on the gains in their portfolio. ‘Here you get 20 percent of the company.’

“For a small fee of $25,000, he explained in a recent letter to investors in his hedge fund, ‘a sponsor that raises a $400 million SPAC [the average size this year] will receive 20 percent of its common stock, initially worth $100 million, if they complete a deal, whether the newly merged company’s stock goes up or down when the transaction closes.’

“Even if the stock falls 50 percent after the deal closes, ‘the sponsor’s common stock will be worth $50 million, a 2,000 times multiple of the $25,000 invested by the sponsor, a remarkable return for a failed deal,’ he wrote.

“Meanwhile, Ackman noted, the IPO investors will have lost half of their investment.

“And there is another advantage: The 20 percent stake is also referred to as the ‘promote,’ a nod to the work sponsors perform in landing a deal. However, that money is considered an investment, not a fee, which means sponsors can pay a lower capital-gains tax on the return if the stock is held longer than a year.”

Ackman’s SPAC Pershing Square Tontine Holdings (PSTH), by the way, is non-standard — it uses a tontine structure for warrants, doesn’t have the same free founder’s share position as most, it was priced at $20 instead of $10, it’s much larger than most SPACs (they raised $4 billion), and Pershing Square Holdings, Ackman’s publicly traded hedge fund, is likely to provide most of the extra capital required to consummate a deal, if any, so there might not be a private funding round in connection with whatever deal they manage to find (those private investment in public equity deals, called PIPE deals, are also often close to a “free money” opportunity for the founders and institutions). PSTH trades at a premium price, which is one reason I haven’t put capital into it, particularly since I’ve already got quite a bit of exposure to it through Pershing Square Holdings (PSH.AS, PSHZF), but it might still work out if Ackman finds the right deal… and it would probably be appealing to me at a lower price.

In my book, four things make sense as my personal “rules for SPACs”:

  1. Warrants on SPACs from managers you expect to make a strong deal are a worthwhile speculation that doesn’t require much cash — five year warrants are a rare beast, otherwise, and getting that kind of warrant on a company that has some actual growth potential is valuable… if you can do so on the cheap. Size those positions as if there’s a very good chance they’ll lose 100%.
  2. SPACs are a good resting place for excess cash with a free “what if they succeed” option if you can buy them below the redemption price, either before or after the units split… before is better, because then you also might get that warrant exposure for free. That doesn’t mean they’ll make money in the short term, the market price fluctuates based on investor interest and “story” (and to a very limited degree, interest rates — since the trust fund earns a tiny bit of interest), but there’s a chance for gains if it turns into a SPAC success story, and it means you almost certainly won’t lose money during the next couple years.
  3. Buying SPACs as an asset class, or building a portfolio to buy and hold through their deal consummation and into the future, is likely to be a mistake, given the historical weakness of SPACs in general and the fact that founders both reap an unusual share of the rewards and are likely to overbid for target companies during the current over-SPAC’d market. I don’t think the SPAC ETF makes sense (that’s the Defiance Next Gen SPAC Derived ETF (SPAK))
  4. Every once in a while, an appealing young growth company, or a company that doesn’t fit the IPO mold, will go public through a SPAC, and eventually grow into being a great investment. Maybe there will be more of those, given the huge number of SPACs that are out seeking a deal right now, but I’d guess that big long-term success in this segment of the market will continue to be rare, and the sexiest stories are likely to be chased to silly price levels, so be careful and pay attention to the real underlying financials of the company being acquired… SPAC deals can include a lot more overpromising than typical IPOs, so try not to get too excited about theoretical growth that’s four or five years off in the future.

So go forth and investor or speculate, but remember that SPACs are not magic. The “free money” is small and a little complicated, the speculative fervor can be high, the SPACs that have announced deals are not secrets and are already trading at what the market thinks that company should be worth (and yes, the market is wrong a lot of the time… but probably not as often as you and I are wrong), and the structure itself will probably make you want to hold your nose a little bit. If you can launch your own SPAC, by all means, do it — that’s where the real money is — but otherwise, be careful and examine each individual SPAC investment on its own merits. And read those filings.

Have a great afternoon, everyone, and do let us know what you think of Snyder’s four teased investments with a comment below… or, of course, if you have others you think are better.

Disclosure: Of the companies mentioned above, I own shares of Pershing Square Holdings, Amazon and Yellowstone Acquisition. I will not trade in any covered stock for at least three days, per Stock Gumshoe’s trading rules.

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sai_aktien
sai_aktien
June 3, 2021 1:38 pm

Hello Travis, I am a bit surprised that you do not own any shares in PayPal and Square. May we know the reason for that?

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Joseph Z
Member
Joseph Z
October 2, 2021 10:11 am

Sofi?

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Luis
Guest
Luis
June 3, 2021 1:58 pm

Thanks for the comprehensive research, Travis, and yes, it’s VGAC they are pithing.

Lisa
Lisa
June 3, 2021 2:02 pm

Bravo! Bravo…I think you are a brilliant writer.

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SPAC’s
Last edited 2 years ago by lisalisa1
Richard Raymond may
Member
Richard Raymond may
June 3, 2021 2:29 pm

What SPACs do you like?
For me I am building a position in 4
TBA Ironsourse
AGC Grab
Blde blade
AUS Wynn o/l gaming

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Richard Raymond may
Member
Richard Raymond may
June 3, 2021 2:39 pm

what de-SPACs do you own?
For me I got in early into the following:
1. IPOB Clover, still hold but this one has sucked so far
2. IPOA VG sold half now hold 300 free
3. IPOE sofi, still holding, but did sell warrants after split to recoop most on 1/4 position
4. DKNG sold half so free shares
5. QS bgt loads of warrants, booked 40k profit, still hold 1000 warrants, but did sell $80 covered calls
6. own Arvl warrants

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Richard Raymond may
Member
Richard Raymond may
June 3, 2021 2:51 pm

forgot one
I ordered a Canoo! and when the shares we under $7 I bgt 3500 shares! I love this pickup. GOEV is the ticker

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Richard Raymond may
Member
Richard Raymond may
June 3, 2021 2:42 pm

I dont like any of the SPACs pumped by this guy except sofi, but it now is too expensive

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Last edited 2 years ago by zebriod
Kathi
Member
Kathi
June 3, 2021 2:48 pm

Does anyone have any info on Imperium? Lot’s of teases but no real info unless I want to pay someone a couple Hundred dollars for info. These teases really grind me-Love gumshoe, stops alot of dumb mistakes.

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Nancy
Member
June 3, 2021 2:49 pm

Just admire the fine amazingly informing detailed info.

•My “2 Cents “ worth of penny stocks

As a penny, & sub-penny investor (usually) saw the SPAC phenomenon before it was formalized much! It showed in postings on TD Am.& YaHoo Fin. co. Profiles describing what a co. “Did as a business” as the two things did not match at all what was really going on after “something hidden& mysterious had occurred to a co I was watching closely for gains! This was in about 2018! Many YaHoo commenters (I also at first!) complained bait & switch type co fraud-totally unaware-! Finally I commented after I got an inkling it was a thing going on!

But!
Have no idea what could have happened, had I not sold out, to my $100. invested for thousands of shares at .0005, in about 5-6 SPAC victims

Re-the fine research re 2 of the investment domains of the paid publisher I call sellers of an “info pak “
which you take on here in clear detail!

!!!!My view is more suspicious of their desirable cultural or financial permanence!!!
[Mine notions are much kess measured, sophisticated or refined!]

Re. 2 areas THE DNA POPULARIZERS& the “CRYPTO ‘BLIPPO’” as they are written-up fully presuming their investment world permanence & surety of content in respectable high ticket “info pak” -my terminology- is that my sources and intuition tell me none of the DNA tracking, tracing, and collecting are SAFE, from very strange foreign DATA HACKING FOR VERY OMINOUS SUBTERFUGE OF ENTIRE CHUNKS OF WORLD ETHNIC CLUSTERS FROM INTRUSIVE DNA/RNA SUBTERFUGE! A persons’ most private essence could out of innocent world family curiosity contribute to a mega negative outcome…will not say more! Actually as a relative of one who jumped into all of this “tissue detective” work, I wish it could have left me out!!
The other concern is re.”crypto’s” as a permanent fixture! Once the “digital dollar” is released soon-and the claim against huge carbon foot print perfusion on the environment is made loud and clear it could certainly downgrade the main old coin Bitcoin to a valuation based on nothing more than the old scam concept of value is in the eye of the Beholder, or in the mind of a person willing to buy! If the value is nothing more than the happy “notching with Fiat currency”, combined with now carbon-foot print discredited “HEAT&LIGHT “ of burned electricity, no tangible mined rare mineral-gold, platinum-to set its essential price tag…the convenience of Bitcoin as a sort of substitute convenient money-order to transfer value still notched to Fiat currency printed and tied to sovereign nations (more & more cautiously husbanding their sovereignty) the assigned convenience versus environmental harm, vs. nations tightening ip on their identities as tax levying, etc. sovereign collections of nation hood will just poke a hole in the non-altcoin CRYPTOS! ! Altcoins which (in this amateur’s view) seem to be industry-type transaction algorithms! Therefore have an intrinsic definite thing to sell-a transaction in a selling of something produced dynamic seem like they have something to sell-like a billable click- every-time an algorithm tickling transaction occurs!

Not a doubter it did not fly for a time-now its convenience too will be edged out if the coming “TREASURY MOVE TO GET IN ON THE ACTION”(ie. levy transaction fees, structures of laddered gains taxes) THE NEW digital dollar-essentially a “blockchain tracked” high tech money order , based on our sovereign FIAT currency; (“full faith and trust of Uncle Sam-no gold”) is also going to wedge out the BITCOIN full-faith and trust of the next speculator!!

Amateur speaking only—Bitcoin is all a “perception-valuation”! Crucial is that there is no intrinsic transferable value-added investment from (high now carbon emitting) mining costs of burned electricity (even if from “‘gold plated’” “mining machines”) created a “actual fiat-traded cash boom” for a “lucky” some, but only points to how far off the old GOLD STANDARD we had come since 1970!!
Naturally suspicious boomer given age and old old family ties to banking!
Great great great •female• (pre-woman’s lib) cousin famously wrote to FDR that her paternally inherited PA bank did not need help! So she turned down the Bank Moratorium in the 1930’s-based on her figures it was amazingly solvent…VERY LOL!!
M.

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Marsha McCroden
Member
Marsha McCroden
June 3, 2021 2:56 pm

I’ve just closed one portfolio and plan to open it in another brokerage. I’ve heard and heard about these batteries (silicon/graphite/graphene) that can power cell phones, computers, cars, space station. Even planes. So I’m investing in the future, but I don’t know which two to invest in. One says it’s in it’s 5th pre-IPO funding round. I can get in for $4.35/share. The other one is founded by a former Tesla employee. I’ve e-mailed several times asking one simple question and can’t get an answer, but I can get in there for $2.60/share. What does the Thinkolator say?

timcoahran
Irregular
June 3, 2021 4:32 pm

Marsha,
Always remember that ANY new invention is a high risk bet. Only bet what you can afford to loose. Price per share doesn’t matter. Only the future CHANGE in price does. Choose the dollar amount you want to bet, then buy the number of shares to make that happen.
Sometimes if i want to bet an idea like that, but don’t know which company will survive – i’ll try a “shotgun” approach. Buy a TINY sample of all of them – knowing full well that some will go down, some will die altogether – but hopefully some might succeed too. One good winner can pay for all of your tiny losses.

Then hold ’em for a long time! Don’t sell when something goes down. We never know which company(s) will come through in the end.

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tanglewood
June 6, 2021 9:08 pm

Marsha : I google’d one and it came up with Redwood Materials. It’s not publicly traded so i’ m not sure how you ‘can get in for $2.60’ unless there is some kind of venture capital pool being offered.
https://electrek.co/2021/01/11/tesla-loses-top-manufacturing-engineer-to-co-founder-jb-straubels-new-startup/

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Scott
Member
Scott
June 3, 2021 4:46 pm

I’m in on SoFi and SEAH.

I love SoFi though, and think the runway is tremendously long.

Also, I need some help, from anyone who would like to weigh in…

I am long 3 REITs… AMT, PLD, and DLR. I need to raise some cash and am wondering thoughts on their long term outlook moving forward.

Thoughts?

Thanks so much!

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Richard Raymond may
Member
Richard Raymond may
June 3, 2021 6:52 pm
Reply to  Scott

own AMT (towers, think 5G) and PLD (logistic) both are up there with the best REITs. Don’t follow DLR

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Scott
Member
Scott
June 3, 2021 7:55 pm

Thanks for your thoughts Travis, I truly appreciate it!

vintee786
August 25, 2021 3:08 pm
Reply to  Scott

i have so much loss in SoFi ? any suggestion to keep or sell ?

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Ngaire Chant
Ngaire Chant
June 3, 2021 5:33 pm

Fabulous article – enough depth to get the picture and not so much that me as a retail investor, to get bamboozled. Thx

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Richard Raymond may
Member
Richard Raymond may
June 3, 2021 11:03 pm

bound to happen, dumpy dump…. If I held PSTH I would very unexcited

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Jeanne
Member
Jeanne
June 7, 2021 2:09 pm

Invested in Pershing Square, but bouncing around with the “hold” in the market; appreciate your comments, Doc Gumshoe, in this volatile time.

kazito
June 14, 2021 10:03 pm

Help from anyone, please.
I’m not sure if this Pershing’s acquisition (10% of UMG) should be viewed as “smash’ , or “trash” ???
Should I hold on to my PSTH shares and warrants, OR, should I dump them??? Please help. Thanks.

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kazito
June 15, 2021 8:25 am

Thank you so much, Travis, for your input. I really appreciate it.

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Cindy Gabriel
Member
Cindy Gabriel
June 15, 2021 2:25 pm
Reply to  kazito

Hello Kazito!

Are you still subscribed to Teeka’s pre-IPO newsletter?

Do you know if his latest recommendation on 6/9 was RobotCache?

kazito
June 26, 2021 9:53 pm
Reply to  Cindy Gabriel

Hi Cindy. Unfortunately, my subscription has expired, and I did not renew it . Couldn’t bring myself to spend another $5,000 for it!

Cindy Gabriel
Member
Cindy Gabriel
June 28, 2021 12:37 pm
Reply to  kazito

Hi Kaz – Thanks for your reply. He’s been offering it for $2500 recently. Don’t know if you think that makes it more worth it. I invested in Flora-Growth, and it went public, but it was a disappointment, so far. At least, I made my investment back, though + a little more.

Still waiting to see what happens with Winc, Emerald and Cloudastructure.

kazito
July 1, 2021 5:25 am

Hi Cindy.
I have been frustrated with Flora Growth too when they delayed our shares transfer to our brokers account because they wanted to sell their 33 million shares at around $6 on the day they went public while the rest of us investors were left out in the cold. If we had had our shares in our brokers account already on the day of IPO, we could have sold them for $6/share, and then bought them again at around half of that now !!! They really stabbed us investors in the back !!!!
As for Winc, Emerald and Cloudastructure, I, too, am waiting to see the sun coming out of the clouds, still yet! Speaking of clouds, however, I did not invest in Cloudastructure 🙂

By the way, here are a couple of Jeff Brown’s most recent recommendations if you are interested:

1. Action to Take: Buy shares in D8 Holdings (DEH), up to $11 a share.
(This one is a recommendation on June 21. 2021 in his “Exponential Tech Investor”). The SPAC D8 Holdings (DEH) will be acquiring the private company Vicarious Surgical very soon! Obviously, we can’t buy the shares of Vicarious Surgical directly since it is still a private company, but Jeff Brown recommends to buy shares of the SPAC D8 Holdings (DEH), up to $11 a share.

2. Action to Take: Buy Nkarta Therapeutics (NKTX) up to $30.50.
(This one is a recommendation of yesterday, June 29, 2021 in his “Early Stage Trader”).
Action to Take: Buy Nkarta Therapeutics (NKTX) up to $30.50.
Founded: 2015
Headquarters: South San Francisco, CA
Date of IPO: July 13, 2020
Lock-up Expiration Date: January 11, 2021
Enterprise Value: $665 million

Good luck and happy investing.
Kazito

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scirocco
Guest
scirocco
July 11, 2021 6:05 pm
Reply to  kazito

Interactive Brokers refused to transfer my flora stocks as they are penny stocks and too low market cap.Any luck with some other brokers?

kazito
July 17, 2021 12:00 am
Reply to  scirocco

I have TD Ameritrade as my broker, and I have had no problem transferring my Flora Growth shares to my broker’s account.

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