Advancing with SPAC public listing comes with a handful of benefits to the companies aiming for IPO. But how do investors perceive investing in a SPAC? Here are several considerations on how SPACs could benefit and weigh investors.
Benefitting off SPAC investing
Investor Junkie noted that the general opinion on the traditional route of IPO is that the process is outdated and inefficient. Wall Street banks are siding with big clients, giving them the promising deals. Meanwhile, regular investors are left in the backburner with leftover deals, often the worst terms.
It becomes different on investing in companies going through the SPAC route. Investors have the chance to buy an IPO on the SPAC before the actual company goes public. Another plus point is that some people find it satisfying to cutting out the Wall Street middleman.
The chance to invest alongside experienced sponsors is another notable benefit to note. Not a lot of investors dare to invest in IPOs. IPOs investments were seen as a fearful opportunity as if jumping into the deep end of the pool. Investing in companies, especially tech companies, are much more risky and complicated to people who have low to zero understanding about the technology. However, with an experienced fund manager being the sponsor, the risk also significantly decreases.
Reconsidering SPAC investing: the risks
No matter how promising SPAC investments are, don’t look away from the possible risks it also comes with. When you invest in a SPAC, you have no clear knowledge of how the company is going to use the money. Outside investors have very limited access to such information. Often, the sponsors control how to distribute the information, who and how much should they share the information. Hence, some investors have no clue over the terms and conditions of the acquisition.
Another important thing to note is that we never know when SPAC public listing scheme will die down. You might end up locking your money for two years for nothing.
Lastly, the general concern for SPAC investing is how it might lead to more speculations in startup valuations. This could happen due to fund managers raising a great amount of money to take them public. The aftermath is inflation of valuations in an already frail market.
Read also: SPAC, The Non-Conventional Way for Public Listing
Follow and join us on Youtube, Instagram, Facebook, and Twitter to be part of the trader community in Asia
