A 30-year investing veteran breaks down a SPAC strategy that enterprising retail investors can use on their own to generate steady and tax-friendly returns — and explains why now is actually the best time to invest in the beaten-down asset class
selling the shares within 10 business days following the completion of a shareholder-approved business combinationBecause the IPO capital that SPACs raise goes into a trust that holds low-risk, short-term Treasury bills, if a deal fails to complete within the required timeframe, the SPAC is liquidated usually within two years and investors get their $10 shares plus interests back.
On the reward side, if a SPAC announces a transaction that the market perceives as favorable, investors are likely to get a post-announcement pop where shares surge, he added. The average SPAC redemption rate surged to 52.4% during the third quarter from 10% in the first quarter and 21.9% in the second quarter of the year, according to theSome day traders have taken another route, pouncing on the SPACs with the heaviest redemptions and highest short interest in the hope of squeezing professional investors.
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