5 SPACs with Positive Returns
Since the start of 2020, over 400 companies have gone public via Special Purpose Acquisition Corporations (SPACs). SPACs, often referred to as "blank check companies," are entities formed specifically to raise capital through an initial public offering (IPO) with the intent of acquiring an existing company. This alternative route to public markets has surged in popularity, offering a quicker and often less scrutinized pathway compared to traditional IPOs. SPACs typically have two years to complete an acquisition, and if they fail, they must return the raised funds to investors.
SPACs provide a unique opportunity for companies to go public without undergoing the lengthy and complex process of a traditional IPO. This mechanism allows for greater flexibility and can be particularly attractive to high-growth companies seeking faster access to public capital. However, the performance of these entities post-merger has been a mixed bag.
Of the 400+ SPAC mergers, less than 10% have delivered positive returns for investors. On average, SPAC mergers have yielded a disappointing -67% return. Despite this trend, SPACs remain a fascinating financial instrument, providing opportunities for high growth albeit with significant risk.
In the current climate, many investors are steering clear of SPACs, wary of their historically poor performance. Yet, this broad avoidance may result in some promising companies being overlooked. Here are 5 SPACs that have defied the odds and generated positive returns for their investors:
Vertiv Holdings
Industry: Digital infrastructure technologies for data centers, communication networks, and commercial/industrial environments.
Total Returns Since Merger: 611%
Market Cap: $32.8 billion
EV/EBIT: 36.5x
DraftKings
Industry: Sports betting
Total Returns Since Merger: 285%
Market Cap: $17.9 billion
EV/Gross Profit: 11.3x
Symbotic
Industry: Robotics and technology for warehouse automation
Total Returns Since Merger: 266%
Market Cap: $3.8 billion
EV/Gross Profit: 10.3x
Hims & Hers Health
Industry: Telehealth platform for consultations, electronic records, digital prescriptions, and pharmacy fulfillment
Total Returns Since Merger: 134%
Market Cap: $4.7 billion
EV/Gross Profit: 5.7x
Blue Owl Capital
Industry: Direct lending to middle market companies, alternative asset managers, and real estate owners/tenants
Total Returns Since Merger: 85%
Market Cap: $9.1 billion
Price to Book Value: 5.3x
These examples demonstrate that while the broader SPAC market has faced challenges, there are still successful SPAC stories worth noting. Investors who are willing to conduct thorough due diligence and look beyond the general skepticism can find opportunities in the SPAC landscape. Despite the recent downturn in overall SPAC performance, these five companies highlight the potential for significant returns. For investors, the key lies in identifying the right targets—those with robust business models, strong management teams, and clear growth trajectories. The world of SPACs is indeed volatile, but with careful selection, the rewards can be substantial.
As the market evolves, it's crucial to remain informed and vigilant. Understanding the underlying business and market conditions of potential SPAC investments is essential. While the majority of SPACs may not perform well, those that do can offer extraordinary returns, as evidenced by the companies listed above. Therefore, savvy investors should keep an eye on the SPAC market, continuously seeking those hidden gems that have the potential to outperform.