SPAC Market Discount Deepens; More to Come?

Over 35% of pre-deal SPAC units closed under $10 and just over 50% of pre-deal SPAC common did the same.

Beware the SPAC Pendulum

It’s official, the SPAC market pendulum is swinging back towards “normal”. The question is how fast, how far past “normal” it will go, and who will get whacked as it swings by.

For those in need of additional data points on the market to help recognize the shift, today gave it to them. The market saw a poor showing for SPAC IPOs (several had been downsized already), two lackluster deals (SPFR actually down ~5% and CHAQ effectively flat), and an incredible amount of SPAC units and common below $10.

Just how many are trading at discount as of today’s close? 35% of pre-deal SPAC units and over 50% of SPAC common. Just look at these numbers:

ba_spac_unit_under_10

ba_spac_equity_below_10

There is a lot happening beneath those charts, so here are some of the biggest SPAC common discounts:

CLAS -4.2%
SWET -4.0%
AKIC -4.0%
PNTM -3.9%
OSTR -3.8%
SHAC -3.7%
ADEX -3.6%
JCIC -3.6%
PRSR -3.6%
PACX -3.6%
ASAX -3.5%
AEAC -3.5%
EAC -3.5%
MAAC -3.5%
PGRW -3.5%

Take Away

So what happens tomorrow? Well, the twitterverse is not optimistic. In response to our tweet of the “35% of Pre-Deal SPAC Units Closed Under $10” chart we’ve already received a few comments effectively saying “it’ll be 50% by close tomorrow.”

There is probably little that can happen in the very near term to change that overall sentiment, so the pendulum will keep swinging back and investors will need to make sure they don’t get whacked as it goes by. That means buying smart below/around $10, picking SPACs with good team, sponsor and underwriter track records, and playing for yield plus optionality.

Source: The Street – SPAC Market Discount Deepens; More to Come?