Orion's portfolio managers are extremely articulate on what's driving the market. Here's Christopher Malsam on one of the biggest trends of the year.
It’s been a wild ride for investors over the last year, to say the least. Here are just a few of the different trends going on in the world of finance:
- Cryptocurrencies
- NFTs (Non-Fungible Tokens)
- Short Squeezes (GameStop)
- Margin Trading
- SPACs (Special Purpose Acquisition Company)
Special Purpose Acquisition Companies (SPACs) are not new. In fact, they have been around since the 1990s, starting with GKN Securities and David Nussbaum. They are an alternative to traditional initial public offerings (IPOs). In our view, the purpose of these vehicles appears straight forward: They are blank-check organizations formed with the purpose of acquiring or merging with another company within a set time frame to go public.
The typical SPAC process can take up to two years, beginning with a formation and IPO phase and moving through target search, negotiations that include investor meetings and shareholder votes, and going back to the target search phase if no agreement is reached. Once a target company has been identified for acquisition, the de-SPAC process, which is similar to that of a public company merger, begins. The merger of the target company and the SPAC is finalized by filing the Super 8-K.
However, just because someone says they are in the process of forming a SPAC, does not necessarily mean that the SPAC will happen with a targeted company/business. A lot of negotiating must happen behind the scenes between managers and investors to close these deals.
For example, in April 2020, TGI Fridays was going through a SPAC to go public via a merger with Allegro Merger, but the process failed due to “extraordinary market conditions,” according to their 8-K. Another nonstarter took place in 2019 between CEC Entertainment (owner of Chuck E. Cheese) and Leo Holdings with no official reasoning behind the failure of the SPAC merger process.
Fast forward to today. SPACs are taking place at a rapid pace. Through March 15th, 2021, the SPAC Insider reported that in the last 70 days, the market has already seen 252 SPAC listings go public (roughly 3 a day) with almost 400 in the process of looking for an acquisition to take public.
To put this in perspective, only 248 took place over the entire year of 2020.
At Orion, we are in a position to help investors recognize these types of trends in the broader, alternative investment markets. Our offering of strategies such as the Blackstone Alternative Multi-strategy, which invests in SPACs, is one way to try to capitalize on the trends of everyday investors. If you watch the markets, look around and see what companies you may recognize that are possibly going to be brought to market via a SPAC. You may be surprised!
To find out more about strategies available on the Orion Portfolio Solutions platform, and to see how we can help you capitalize on market trends, get in touch today!
