2nd Pre-Merger SPAC ETF Launches

June 24, 2021

Robinson Capital Management is getting into the blank-check company guessing game with the launch of the Robinson Alternative Yield Pre-Merger SPAC ETF (SPAX).

The active fund began trading Tuesday on the NYSE Arca, and seeks to pick out special purpose acquisition companies that it believes will see share price spikes in the future.

Special purpose acquisition companies are better known by their acronym, SPAC. These companies exist solely to raise money through an initial public offering, waiting until a private company merges with it to go public while bypassing the IPO process. SPACs have 24 months after their creation to be acquired, or they are dissolved and their funds returned to shareholders.

SPACs soared in popularity in 2020, raising more than $81 billion.

SPAX isn’t the first ETF designed to create exposure to blank-check companies. The SPAC and New Issue ETF (SPCX) launched in December, and is likely the closest direct competitor to SPAX, as they both rely solely on acquiring shares of premerger SPACs they believe are likely to produce share price spikes once a combination is announced.

SPAX is a cheaper option, carrying an expense ratio of 0.85% versus SPCX’s 0.95%.

The actively managed Morgan Creek - Exos SPAC Originated ETF (SPXZ) and the index-based Defiance Next Gen SPAC Derived ETF (SPAK) are the other established SPAC-focused ETFs. However, they differ slightly in strategy since both hold positions in companies that emerge from a SPAC combination.

 

Chart courtesy of StockCharts.com

 

It’s notable that the two funds that partially track post-SPAC companies have posted negative returns over the course of their lives. SPXZ has lost 16.79% of its original value, while SPAK is just barely in the red, having lost 0.5%.

That’s partially tied to the performance of companies after their mergers are fully consummated. A Bloomberg Law report from February shows that, of the 24 SPAC mergers that were fully completed since January 2019, 14 were negative in their first month as publicly traded companies, and eight more were negative year-to-date.

Contact Dan Mika at [email protected], and follow him on Twitter.

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