Wall Street holds the cards as Main Street chases blank-check deal frenzy

BOSTON/NEW YORK (Reuters) – Josh Black was looking for the next lucrative deal after scoring a 500% profit in a few weeks by investing in electric truck maker Nikola Corp NKLA.O following the announcement of its merger with a blank-check acquisition company.

He then invested $23,000 in Corp (SPAQ_u.N) after the special purpose acquisition company (SPAC), backed by buyout firm Apollo Global Management (APO.N), clinched a $2.9 billion deal to merge with electric car maker Fisker.

This time Black wasn't so lucky.

The mechanic from Cherry, Minnesota is down over 10% on his investment after Spartan's stock gave up much of its initial gains following the announcement of the Fisker deal last month.

It's a different story for the big mutual funds, including BlackRock (BLK.N), AllianceBernstein and Federated Hermes Kaufmann, that were invited to finance the Fisker deal – and buy shares in Spartan before it was announced.

Even after the decline in Spartan's stock, they're still up about 25%.

To be sure, retail investors who buy into before they clinch deals pay the same price as big firms. But they have to do this without knowing what the acquisition will be, taking a leap of faith on a SPAC's management team.

The biggest SPAC investors are treated differently.

Source: Reuters – Wall Street holds the cards as Main Street chases blank-check deal frenzy