OT: SPACs

[jethreauxdawg]

Upthemiddlex3Punt and Fishwater or anyone else who is fluent in SPACs:
I've read the wiki on r/spacs that was linked in a thread last week. I think I understand the basics of how they work. I am curious about how the actual transactions occur after a merger actually happens, if it happens. For example, one SPAC being discussed in r/spacs is ITAC. Industrial Tech Acquisitions, Inc. (NASDAQ:ITACU) "Each unit issued in the IPO consists of one share of Class A common stock and one warrant to acquire one share of Class A common stock at an exercise price of $11.50 per share. Once the securities comprising the units begin separate trading, the shares of Class A common stock and warrants are expected to be traded on NASDAQ under the symbols “ITAC” and “ITACW”, respectively."
So buying one share of ITACU is equivalent to buying one share each of ITAC and ITACW? If the merger happens, one share of ITAC converts to one share of the new stock? If the merger fails to happen the IPO price plus interest is only returned to ITAC or ITACU shareholders. ITACW owners would get nothing if a merger doesn't happen. In this example, if the merger happens and the owner of a warrant wants to convert their warrant into a share of the new stock, it just costs them an additional $11.50 at the time of conversion and that must be done within a specified period of time after the merger? Warrant owners could also sell their warrant. If the merger happens, does the ITACU share convert into one share of new stock plus you retain the warrant which allows you to buy an additional share of new stock for $11.50? So as long as the new stock sells for more than $11.25, ($11 + $11.50)/2, you make a profit. Am I following correctly?

 

[Mobile Bay]

If I learned anything from the GameStop event about investing it is this. Reddit now has shown it's power. However it's also shown how easy it is for somebody to drop 100-200k and completely control the discourse on Reddit. That's where the whole dogecoin/silver/AMC pump and dump came from.

Because of this I would never consider anything financial if it's being talked about on Reddit.

Hell, just go on /r/Daveramsey and see how many posts on there sing the benefits of credit cards.

 

[Apoplectic_Objurgator]

Upthemiddlex3Punt and Fishwater or anyone else who is fluent in SPACs:
I've read the wiki on r/spacs that was linked in a thread last week. I think I understand the basics of how they work. I am curious about how the actual transactions occur after a merger actually happens, if it happens. For example, one SPAC being discussed in r/spacs is ITAC. Industrial Tech Acquisitions, Inc. (NASDAQ:ITACU) "Each unit issued in the IPO consists of one share of Class A common stock and one warrant to acquire one share of Class A common stock at an exercise price of $11.50 per share. Once the securities comprising the units begin separate trading, the shares of Class A common stock and warrants are expected to be traded on NASDAQ under the symbols “ITAC” and “ITACW”, respectively."
So buying one share of ITACU is equivalent to buying one share each of ITAC and ITACW? If the merger happens, one share of ITAC converts to one share of the new stock? If the merger fails to happen the IPO price plus interest is only returned to ITAC or ITACU shareholders. ITACW owners would get nothing if a merger doesn't happen. In this example, if the merger happens and the owner of a warrant wants to convert their warrant into a share of the new stock, it just costs them an additional $11.50 at the time of conversion and that must be done within a specified period of time after the merger? Warrant owners could also sell their warrant. If the merger happens, does the ITACU share convert into one share of new stock plus you retain the warrant which allows you to buy an additional share of new stock for $11.50? So as long as the new stock sells for more than $11.25, ($11 + $11.50)/2, you make a profit. Am I following correctly?

I bought the open door spac ticker. Lots of upside leading up to the announcement. After the merger the ticker changed to OPEN with same number of shares. Will say that the stock dropped quite a bit after the merger - company employees have been selling like crazy.

 

[JungRebel]

I've been reading about these more and done some ASPL since the announcement of the merger with Wheels Up. Really interested to see how the first publicly traded private charter business does and I like the prospects of a growing wealthy class growing more afraid of commercial air travel. I would like to hear the case against ASPL before going further in it.

 

[UpTheMiddlex3Punt]

Buying one unit is equivalent to buying one warrant and one common, but the price of a unit is almost always less than the sum of its parts. Some of this is due to fees when you split a unit and some of it is due to investors wanting to do either commons or warrants but not both. One advantage of units is you can get in earlier before the commons and warrants list.

If the merger doesn't happen, then the net asset value per share will be returned to the holders of commons and units. Warrants get nothing. This value might not have any interest, so you could be parking 10 dollars a share into the SPAC and get 9.95 back in two years.

If a merger does happen, the units will split automatically and the tickers on commons and warrants will change. After thirty days or so warrants become redeemable. Generally they won't be redeemed if the stock price is below 18 (or whatever level allows the company to trigger a forced redemption). If the price is below 11.50 you will almost never see warrants redeemed. The warrant will almost always sell for some price, even if the stock price is below 11.50 since there is still time value. The warrants are redeemable until some period of time post merger passes, usually 2-5 years.

If the stock price gets high enough, the company can force redemption within thirty days. In that case you have to sell the warrants or redeem them by trading the warrant and 11.50 for the share. You'll have to call your broker to do this and usually there's a fee. Some companies will do a cashless redemption where they will not require you to pay 11.50 but give you a fractional share per warrant based on the fair market value of the commons. This reduces dilution from using new shares. Other SPACs have a cap that limits the upside of the warrants. A common cap is 0.361 shares per warrant if the common price is above 18. This number seems random, but it's (18-11.5)/18.

 

[615 Guy]

Every SPAC is a little different, I'd recommend reading through the S-1 filing of the SPAC you're interested in, this will outline how many warrants (or fraction of a warrant) come with purchase of that unit, note that if you have a fraction of a warrant it will be rounded down. The S-1 will will also outline when the units will split into commons and warrants which are then each tradable. In many cases units will split before a merger is announced (typically about 50-60 days from the SPAC IPO). I have been a big fan of warrants b/c the cost basis is lower, however, as mentioned by another poster there are several other considerations when purchasing warrants such as early exercise and also the possibility of losing your entire investment if the SPAC does not find a merger partner. I am currently in CCIV for several thousand warrants so am hoping to hear about a definite agreement with Lucid (EV company). Regardless, do your homework on SPACS and don't take the word of people on message boards.