disclaimer: i hate the game of monopoly and think its a badly designed game but when i'm forced to play it i will attempt to accumulate as much monopoly money as possible, while actively trying to avoid playing it ever again (by complaining about how much it sucks).

so lately i've managed to make a bit of free cash by 'investing' in SPACs...

wtf is a SPAC?

it stands for special purpose acquisition company and basically its just a bunch of cash that rich investor types put in a pot and then they list that pot on the stock exchange as a SPAC and then the people managing the SPAC find a company to merge with and then that company is on the stock exchange, it's sort of a backdoor way for companies to easily get listed on the stock exchange and raise some cash (don't ask me why it's better than the other ways i don't know).

here's a good read on the whole deal - https://www.spacdaddy.com/post/spac101-start-to-finish

so?

the thing that makes these SPACs different than other stocks is they have a price floor, or NAV (net asset value) which they can't go below* which is usually around $10-$10.20. however if they merge with a company that people are excited about or think is good then they can go MUCH higher, this means if you get in around $10-$11 you have limited downside and potential high upside.

  • during a market crash they may dip below this, as they did during the corona crash, but only slightly and they came back up pretty soon

and?

well this means that you can kinda break one of the golden rules of 'investing' - don't invest more than you can afford to lose. basically i've been putting all the money i had saved for tax and also a load of savings that we have been building up for a house deposit into these things. usually to take advantage of the stock market you need big piles of cash you don't mind risking and who tf has that? however if you have savings or money put aside for tax you can put it into these SPACs and know your downside risk in advance, e.g. if the SPAC is at $10.50, lowest it can go is $10 so you are risking around 5% for a potentially much higher upside.

you can basically use these SPACs near NAV as a savings account where the savings are also lottery tickets.

you do need to be fairly engaged with SPAC news etc to find good ones and knowing when to sell, when to hold etc is a whole skill in itself, i definitely could have made way more than i have if i wasn't dumb.

also, these things can take many months to find a target so you gotta be patient!

how do i find about this shit?

i follow the subreddit r/SPACS/ which has a lot of regular info posted, links to learn about it etc. if you are like me and spend most of the day in front of some kind of screen then if you just keep your ear to the ground here and do a bit of research you should find some good ideas. the golden rule if you are 'investing' money you can't afford to lose is always make sure you go in near NAV (the price floor). if you go into something around $12-$13 which is up that high on a merger rumour or something, you can possibly get burned if it falls through.

a lot of the talk on the sub is about SPACs later in the cycle when they are closer to merger and are quite a way above NAV so they are more risky, also SPACs are 'so hot right now' so a lot are trading above NAV on rumours or just reputation of the management team, these could still be good but of course are more risky.

one example, i was just browsing the r/spacs/ daily thread and a bunch of people were suggesting ZNTE, i saw it was at $10.75 which is close enough to the bottom for me so i threw $2k in, a week later it was at nearly $14 based on a rumour it might merge with Lillium (a company making electric air taxis for rich people), boom, $600 for absolutely nothing. the key here is i would NEVER have put that $2k into the stock market usually because losing it would be very bad.

another example, i opened the sub and saw the SPAC ROCH was due to merge with PureCycle, a plastics recycling company and people seemed pretty hyped, but the price was only $10.8 so I put some in, a month later this was at 20, basically double, of course i sold way too early but still got some free money.

so it's really risk free?

so first up, please do your own research (r/SPACs is a great place to start), this isn't financial advice, don't hold me responsible etc etc.

but from what i can tell, pretty much yes, of course there are cases where the SPACs find a merger target that people generally aren't excited about and it drops back to $10-$10.20ish so you can lose anything over that. also if you are overseas from US then you have the dollar exchange rate which can fuck you, i'm in UK and the USDGBP rate has been tanking over the past few months so i've lost out there but i'm still way up overall.

also ONCE THE COMPANIES MERGE THE PRICE FLOOR DISAPPEARS, the ticker symbol changes from whatever the SPAC is to the new companies ticker and it's trading just like a normal stock, so if it's a company no one is excited about it can drop off a cliff here, so get out before then. if you follow along on r/SPACs and also StockTwits (this site is an absolute hellhole but it does sometimes have some useful info) you should be able to know well in advance of this happening.

there may be some unforeseen event which could cause bigger losses but i don't know what that could be, again please research it yourself.

the biggest problem is gonna be not knowing wtf you're doing (this was mine) and selling too early, or panic selling on red days when your gains start to disappear etc but you get a feel for it eventually.

is this compatible with my leftist beliefs?

honestly, fuck knows, i just see it as a way to make some extra money by putting money that's only ultimately gonna go to the tax office to spend on missiles into random 4 letter words on the internet until number go up. what i'm doing has no material effect on anything except my own bank balance. in the financial world i'm not even a minnow, i'm like a fucking krill or some shit just hoping to get pulled along by the whales as they fuck around throwing their huge piles of money into all this bullshit so that i can put it towards maybe one day having the esteemed privilege of being able to sign up for a lovely 35 year fucking mortgage (where the banks get even more free fucking money).

any tips?

some ones near NAV i have holdings in currently are:

AACQ - will merge with fintech company, rumoured to be BlockFi which would be big because blockchain

CRHC - SPAC run by gary cohn, was on the trump team and looks like a gigantic piece of shit so i'm sure he will make some money

CONX - looking for a 5G company which is expected to be the next big thing apparently (aren't they on 6G in china now?)

some others i don't have but looking at - GNRS (weed), ACND (gaming), BOAC (renewable energy)

also here's a good post from r/SPACs (honestly this place is a gold mine) which has 100 near NAV - https://www.reddit.com/r/SPACs/comments/l5rd6f/list_of_103_spacs_near_nav_with_1_sentence_dd/

also this - https://www.spacdaddy.com/post/spacdaddy-list-the-re-up-152-oversold-spacs

hope this is useful to anyone and i will try to answer any questions to the best of my limited knowledge