FCA to consult on SPACs

31st March 2021 16:13

Myron Jobson from interactive investor

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interactive investor welcomes news of consultation on ‘blank cheque IPOs’.

Richard Hunter, Head of Markets, interactive investor, says: “SPACs are designed to raise money from an Initial Public Offering (IPO) with the intention to acquire a company within two years. As such, they are known as “blank cheque IPOs” and immediately fail one of the golden rules of investment – “invest in what you know”.

“It also makes asset allocation and portfolio balancing difficult for the investor since the SPAC target company may simply not be known at the outset.

“Of course, the IPO is designed to tempt investors with further incentives such as the ability to exercise warrants at a future date, although not all platforms will trade the US SPACs with the warrants attached (as it makes them a packaged product). Once the warrants are separated that’s when interactive investor will offer access to the SPAC.

“There will, of course, be successes along the way and recent (UK) examples such as electric bus maker Arrival (NASDAQ:ARVL) choosing this route show increasing popularity (although Arrival shares are currently trading below the IPO price).

“Investors should take a long, hard look before committing to SPACs and the fact that they have moved on to the radar of the FCA should set some alarm bells ringing for potential investors.”

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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