The SPAC Market: What You Need To Know | Your Money 5-3-21
What do you know about special purpose acquisition companies?
In the latest episode of Your Money, Leo Daprile, of Gem Young Insurance and Financial Services in Canfield, gives insight into SPAC companies and why lawsuits can gravitate toward them.
SPACs don’t produce a product at their start, but raise initial funds through hedge funds and private equity, according to Daprile. He says the structure of SPACs is what draws concern.
“The average individual doesn’t have an opportunity to get into a SPAC during its formation, and that’s a key point,” he says. “It’s usually hedge funds and private equity that are setting these up.”
After formation, SPACs look into companies that could potentially be acquired. If the SPAC is unable to complete a deal, the investors will get their money back with a rate of return.
According to Darpile, the original SPAC investors can opt into the deal if they approve, but the average investor is set up for an average 35% loss. Meanwhile the original investors gain 393%.
“It looks [like] a little bit of a rigged transaction to me,” Daprile says. “That’s why, all of a sudden, everybody’s suing these SPACs.”
Original Air Date: April 27, 2021. Every Tuesday during the Dan Rivers show on News Radio 570 WKBN, Gem Young President Leo Daprile hosts a radio show called Your Money. Daprile brings his vast knowledge of all things “money” to discuss the topics in language everyone can understand.
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