Defiance ETFs, an issuer focused on providing passive exposure to disruptive innovation, launched an ETF targeting special purpose acquisitions corporations (SPACs). The Defiance Next Gen SPAC Derived ETF (SPAK) tracks an index provided by Indxx and will invest in a mix of SPACs (20% weight at reconstitution) and SPAC-derived companies (80%), the prospectus says.
The fund lists on the NYSE Arca and comes with a expense ratio of 0.45%.
SPACs are similar to IPOs or private equity in that they are companies formed with the intention of acquiring or merging with an existing company. They have a set period in which to complete this transaction or they are dissolved and the money returned to investors.
Matthew Bielski, CEO of Defiance, describes SPACs as “private-equity style IPOs.”
SPAK “gives you the full ecosystem of the SPAC universe in a very cost-efficient wrapper,” he added.
The underlying index has minimum size ($250 million), float (10%) and liquidity requirements. Although reconstitutions occur on an annual basis, securities can be added to the index throughout the year on set dates. At the ETF’s launch, the index had 36 components.
Bielski noted that there is also a governance clause that screens out any company that is subject to a fraud-related investigation. As such, Nikola Motor Company, a popular SPAC-related company, is not in the index. It is currently being investigated by the SEC for securities fraud.
According to Bielski the new fund offers exposure to pure plays in disruptive technology spaces. SPAK’s top holdings include Draftkings (18.75%), Clarivate (12.24%) and Vertiv Holdings (9.54%). He says that his firm is seeing interest from both institutional investors and financial advisors who would like to access the area, and the fund has been seeded with $2.5 million.
Contact Heather Bell at [email protected]