Although Special Purpose Acquisition Companies (SPACs) appear to show stabilization, they remain dangerous. UBS quietly banned advisors from pitching them to clients.
Lordstown Motors Corp. and DiamondPeak get credit for starting the frenzy in the IPO workaround. But Churchill’s (NYSE:CCIV) deal with Lucid Motors is a reminder that investment managers are not friends with retail. They look out for companies.
Lucid benefited from a solid deal that saw an $11.75-billion equity transaction. Those who bet on more upside before the terms are left holding the bag. CCIV stock peaked at almost $65.00.
Triterras (NASDAQ:TRIT) is another dangerous SPAC. One of the subsidiaries is thought to be bankrupt. The company’s management team has not been forthright with investors. That is a bad sign.
Not all SPACs are bad investments. QuantumScape (NYSE:QS) has promising technology in the years ahead. Volkswagen hosted a battery day event that re-kindled investment interest in QS stock. VW is a QS backer and will need advancements in solid-state batteries to get an edge over the competition.
Your Takeaway
SPACs are speculative trades that are highly rewarding. As usual, get ahead of the herd in buying and selling. This is easier said than done. So, look out for red flags like opaque management and stock underperformance before buying.
