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3 ETFs to Play the SPAC Mania

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2020 was the year of SPACs! 248 SPACs made their debut and raised $83.4 billion in the US in 2020, more than over the entire receding decade. 75 SPACs have already raised $21.5 billion in 2021, per SPAC Research. Several high-profile investors and public figures, including Chamath Palihapitiya, Bill Ackman and former NBA star Shaquille O’Neal have launched their SPACs.

Investors’ voracious appetite for fast growing companies and abundant liquidity are fueling this boom. Nearly 300 SPACs with about $90 billion in cash are now looking for acquisition targets, per WSJ.

SPACs, also known as blank-cheque companies, raise money from investors, only to find a private company and take it public. Startups going public through SPACs can avoid the cumbersome and time-consuming traditional IPO process.

They can also avoid normal due diligence that a traditional IPO has to go through and make rosy projections about future results.

SPAC ETFs provide diversified exposure to a basket of most liquid SPACs and SPAC IPOs since picking the winners among individual SPACs can be very difficult.

The Defiance NextGen SPAC IPO ETF (SPAK - Free Report) invests 80% of its portfolio in companies that have gone public through SPACs and remaining 20% is in SPACs that are looking for acquisitions.  Digital sports entertainment and gaming company DraftKings (DKNG - Free Report) and space tourism company Virgin Galactic (SPCE - Free Report) are among its top holdings.

The SPAC and New Issue ETF (SPCX - Free Report) is actively managed, and invests in SPACs and companies that have gone public within past 2 years.

The third SPAC ETF, Morgan Creek – Exos SPAC Originated ETF (SPXZ) launched yesterday. The actively managed fund charges a 1% expense ratio.

To learn more about these ETFs, please watch the short video above.

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