As of this writing, there are 435 special purpose acquisition companies, or SPACs, sitting on billions of dollars in cash and searching for private businesses to take public. Not all of them will succeed. And of those that do find acquisition targets, not all will end up producing strong returns for their investors. It's easy to forget, given the recent IPO market, but newly public companies don't always go up.
An investment in a pre-deal SPAC is a bet on management's ability to leverage their resources, experience, and capital allocation skills to find a great opportunity. And it's because of the track records and connections of their sponsors that I hold these five pre-deal "blank-check" companies in my own portfolio.
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The largest SPAC of all
Pershing Square Tontine Holdings (PSTH) is perhaps the most closely watched SPAC in the market, and for good reason -- it's the biggest. The blank-check company raised more than $4 billion in its initial public offering (IPO), which gives it the ability to target companies that are out of the realm of possibilities for other SPACs.
Not only does Pershing Square Tontine have deeper pockets than the other 435 SPACs in the market, but its CEO, billionaire hedge fund manager Bill Ackman, has a pretty impressive track record himself. In fact, Ackman has already made some of the savviest investment moves of any of the heavyweights during the pandemic era, and I'm confident he'll be able to deliver an impressive acquisition target for investors.
If there was one SPAC sponsor I'd be willing to bet on...
If you read an article about SPAC investing, there's a good chance Chamath Palihapitiya's name will be mentioned. Not only is Palihapitiya one of the most active SPAC investors in the market, but his track record is pretty impressive. Palihapitiya has launched six blank-check companies, four of which have found targets, including Virgin Galactic, Opendoor Technologies, and soon-to-be-public SoFi, which has agreed to merge with Palihapitiya-led Social Capital Hedosophia Holdings V.
With that in mind, I'm holding shares of Palihapitiya's two SPACs that are still searching for targets. Social Capital Hedosophia Holdings IV (IPOD), which raised a little over $400 million, and larger-scale Social Capital Hedosophia Holdings VI (IPOF), which has about $1 billion to work with.
I'm a big fan of this sponsor's first SPAC target
Tishman Speyer is a big name in real estate, with a property-management portfolio that includes impressive properties around the world, including the iconic Rockefeller Center in New York City. And the company isn't exactly new to the SPAC game -- it leveraged its experience and prior relationship to convince property technology company Latch to merge with its first blank-check company, TS Innovation Acquisition.
It decided to launch a second company to try and keep the momentum going, which is known as Tishman Speyer Innovation Acquisition II (TSIB.U). Tishman has an impressive reach and an equally impressive collection of early-stage investments it has made that can help find a great target. And I'm investing my own money because I'm confident Tishman will do just that.
A lot to offer potential targets
When it comes to retail real estate, there's no bigger player than Simon Property Group, which owns an impressive collection of high-end malls and outlet properties and a growing portfolio of retail brands through joint ventures, including J.C. Penney, Aeropostale, and Forever 21.
Simon recently launched its own SPAC, called Simon Property Acquisition Corporation (SPGS.U). When it comes to many retail, entertainment, and some types of technology companies, there simply isn't a better partner to team up with when going public. I'm very confident Simon will be able to leverage its vast resources to attract the attention of some pretty impressive target companies and will be able to deliver a beneficial deal for investors.
These are still speculative investments
As mentioned, I own shares of all five of these SPACs in my own stock portfolio, but it's important to point out that they're all relatively small positions. Investing in pre-deal SPACs is a rather speculative strategy, and there's certainly the possibility that one or more of these won't go my way.
I'm confident that all five of these SPACs will be able to find suitable targets, but it's not a guarantee. Invest accordingly.
