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Hi by popular demand today i’m going to go through SPAC’s and which ones I think are the best.
SPAC’s are definitely not for everyone but I can see the appeal.
2020 was definitely the year of the SPAC with 237 for the year, that is far more than double the amount from 2019.

So what is going on here,
should we be looking at these as an investment and what do I think is the best strategy to take?

What’s a SPAC?

A SPAC is a so-called "blank check company". An investor or group of investors (called sponsors) form a new entity and raise money from the public in an IPO.

The money raised is placed in a trust and can't be touched by the sponsors until a deal is approved. Which is good, so no stealing can happen.

The sponsors then have two years to find a company to buy, at which point the SPAC investors get to vote for or against the deal.
Investors who buy the SPAC at par value have essentially no risk prior to the deal closing because if they don't like the deal, they can elect to get their money back.

SPAC’s generally are bad investments

Charlie Munger a few weeks ago came out and said that the world would be a better place without SPAC’s. He had a few more bad words to say about SPAC’s that I can’t repeat here just in case you have kids in the room.

And truthfully, SPACs have historically been dreadful investments after the deal has closed, and for good reason. The sponsors are incentivised to do a deal, regardless of whether the deal is attractive to outside shareholders or not.

Social Capital’s SPAC’s

The first SPAC’s I'm going to talk about are the wildly popular Chamath Palihapitiya SPAC’s where he has named them IPOA, IPOB, IPOC, IPOD etc.

Bill Ackman’s SPAC
Pershing Square Tontine Holdings (PSTH)

My Opinion

The best SPAC on the market is my opinion is clearly the Pershing Square SPAC. For me personally, I want it closer to the $20 mark.
The closer we can get to $20, the lower the risk.
at even $22 I would be getting very interested. That would be a 10% downside, and significantly higher upside potential.
I’m recording this in March and it’s nearly $30. If I had studied this SPAC earlier, I might have invested when the price was lower. Just at $30, my downside risk is 50% and that is significant.

Seth Klarman, the author of Margin of Safety and famous fund manager of Baupost group, one of the better performing managers of the last 30 years has taken a big stake in Bill Ackman’s SPAC.

Seth is a very shrewd investor and someone that I admire. So this is another tick of approval.

I think Seth invested for the exact reasons I have outlined in this video.
$20 downside price before the deal closes.
Warrants and potential bonus warrants after the announcement
No 20% cut from Ackman, unlike all the other IPO’s
Bill Ackman’s company has invested alongside the public. Therefore highly incentivised to find a great investment.
I like Bill Ackman’s understanding of businesses. He is a follower of Buffett’s principles and although has made mistakes in the past, his character isn’t in question at all.

If i was to get under $22, do I think Pershing Square Tontine Holdings is a good investment?