What Are Your Thoughts on SPACs, and Are They Good Investments? Ken Fisher Answers

SPAC stands for special purpose acquisition company, and despite SPACs’ newfound popularity, they are not new. Ken Fisher, founder of Fisher Investments, explains that SPACs are unique ventures typically formed by a team of professionals with expertise on a certain topic to raise capital from the public market for the purpose of acquiring private companies which effectively takes them public. The general notion is that these experts will make more educated decisions regarding which innovative companies to take public and investors can pay these experts a kind of entrepreneurs’ mark-up.
Ken Fisher says the SPAC process is a little bit like an initial public offering (IPO) in the sense that it consists of offering previously private companies’ stock to the public, and it’s a little bit speculative since the initial SPAC is just a wrapper without any intrinsic value until it makes an acquisition of a private company. However, it’s arguably less speculative than some IPOs were in the past, particularly in times like the 1990’s Tech Bubble, when companies were going public with no hope of near-term profitability.
Ken Fisher believes SPAC’s recent popularity points to increasingly optimistic investor sentiment. As Ken first said back in the 1980s to describe IPOs, “IPOs could be said to mean It’s Probably Overpriced,” and that may well apply to many of today’s SPACs as well.
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