When we made the turn into the second half of the year, I had a little fun and went back to look at my predictions for 2020.
I confess that a global pandemic was not on the list, so I cringed a bit when I opened the list.
I didn’t need to. I must say, they were pretty darned good for the halfway point of a crazy year.
We’ll talk more about all of them another time, but the one I want to highlight today was prediction #6.
The 2020 IPO market will be both a boom and a bust.
Correct.
But you might not be hearing as much about IPOs as you are about SPACs, which are a kind of IPO.
SPACS are on fire right now. I suspect you’re not be as familiar with them, so let’s talk about what they are and what you need to know…
If I asked you to name the hottest investments in the stock market right now, you would probably say biotechnology, 5G, or artificial intelligence.
And you wouldn’t be wrong. They are huge hypergrowth investments set to play out for years, and many of the stocks are doing well right now.
But SPACS are blazing hot.
SPAC is short for Special Purpose Acquisition Corporation. They have been around since the 1990s but were underutilized until recently.
A SPAC is formed when a company raises money and files for an initial public offering with the intention of using its cash to buy or merge with a private company.
They are often referred to as blank check companies because that’s basically what they are – a blank check ready to be written out to buy another company.
Let me give you an example of how they work and how much money you can make.
About a year and a half ago, I discovered a little-known company called MTech after speaking with some of its executives at a conference. MTech had raised $50 million with the specific purpose of merging with or acquiring an ancillary cannabis company. The stock had begun trading two years earlier as the first U.S.-listed SPAC to specifically target the cannabis industry.
I learned that the company had announced plans to merge with MJ Freeway – a leader in cannabis software – and I was sold. It was all public information, but unless you take the time to sit down and talk to CEOs and executives, it is hard to find this type of opportunity.
MTech didn’t move much after I recommended it to my Investment Opportunities subscribers as we waited for the merger to take place. But when it did, the stock soared.
Our MTech shares became Akerna (KERN) shares, as that was the name of the new company. Within days, the stock rallied from $10 to more than $70. We sold some shares as high as $65, locking in a 6.5X gain from the original entry price.
We’ve seen a lot more of this recently.
Nearly 35% of all new listings on the Nasdaq are SPACs. And in just the first half of 2020, they raised nearly as much money as they did in all of 2019 – $12.3 billion versus $13.6 billion.
Much of it is high profile, too. Last year, Richard Branson’s Virgin Galactic (SPCE) went public via a SPAC and is now worth over $5 billion. Most SPACs IPO at $10 per share and trade at that level until a deal is announced. After the announcement that the original SPAC was buying Virgin Galactic, the stock rallied to $42.49. Today it trades around $24.
Another stock that got a lot of attention is DraftKings (DKNG), the fantasy sports site. It went public via a SPAC earlier this year. The SPAC also priced at $10 per share, and after the announcement to buy DraftKings, shares rallied to $44.79.
Even my favorite potato chip company is about to go public through a SPAC! Collier Creek Holdings (CCH) announced about a month ago that it would combine with privately held Utz Quality Foods to create Utz Brands. Guess what the symbol will be? Yeah… UTZ.
One of my favorite hypergrowth trends is also in on the SPAC action. On Monday, Spartan Energy Acquisition Corp. (SPAQ) said it would merge with Fisker to develop a fully electric SUV called the Ocean. SPAQ doubled from around $10 to over $20 before pulling back to the current price of $15.45.
Fisker has been around a while and sold itself to a Chinese company for pennies on the dollar. Now it’s back at it. I’ll have to do some more digging, but I find myself skeptical at the moment.
And there’s Nikola (NKLA), which you’ve probably heard about. This electric vehicle truck company has been all the rage, especially among individual investors. The stock rallied from $10 to over $90 before coming back to Earth. That’s unbelievable to me. The company has no sales… and no revenue yet.
I’m all in on the electric vehicle trend. EVs are the future of transportation. But please stay smart about investing in it. Look to the next-generation battery makers and other well-positioned companies to capture the trillions of dollars that will be sloshing around in the coming disruption.
There’s a lot of money splashing around in SPACs right now, too, and I expect that to continue as more deals continue to be announced. In fact, well-known investor and hedge-fund manager Bill Ackman is getting in on the action. He’s no stranger to the spotlight… or controversy. I’ve been very critical of him in 17ever.
He wants to go public at $20 per share instead of the customary $10. (Of course he does.) He hasn’t said yet what kind of company he would go after.
Wall Street is nothing if not good at creating a herd, and right now there’s herd heading for SPACs.
P.S. SPACs can be good opportunities if they are operating in the right trends, like the future of transportation. We know it’s coming, and we know it wouldn’t be possible without the technologies necessary to power it.
I’m talking about batteries.
Insiders are already calling this potential new battery a “paradigm shift” in energy technology. Forbes calls it simply: “The battery that could change the world.”
Trust me, it’s amazing.
This breakthrough device could change just about everything in your life – from how you get around to how you communicate with others… even the way you think about the world.
For early investors, this presents the kind of moneymaking opportunity that could turn a tiny initial stake into an absolute fortune.
We may see battery SPACs in the future, but folks who get in on this breakthrough now, BEFORE it’s rolled out on a mass scale, will have the chance to be a part of perhaps the single largest legal creation of wealth in the last 25 years.
I can share with you what I’ve learned and show you how to profit. Click here to learn more.
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