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Investing.com — And now there’s an ETF for this year’s hottest trend: Spacs.
Defiance ETFs announced the launch of the Defiance Next Gen SPAC Derived ETF, also called SPAK, which tracks special purpose acquisition companies. Shares opened at $25.74 and are moving very little.
Once an obscure corner of the market, Spacs, also called blank-check companies, are all the rage for those that want to go public in a less traditional way.
Already, companies like Nikola Corp (NASDAQ:NKLA) and DraftKings Inc (NASDAQ:DKNG) have used Spacs to go public. A blank-check company is a shell company without operations but with the intention of acquiring or merging with a company the using proceeds of the Spac’s initial public offering.
The danger of a Spac is there’s no traditional road show to vet the company. Investors have to trust in the judgement of the Spac founders.
Earlier this year, Nikola listed on the Nasdaq by merging with the VectoIQ Acquisition Corp Spac, which was backed by investors including Fidelity and ValueAct, according to Reuters. VectoIQ raised $200 million in a May 2018 IPO.
Nikola founder Trevor Milton recently resigned after a short-seller report from Hindenburg slammed the company for fraud, days after General Motors Company (NYSE:GM) had said it would take a stake in the company.
“Picking the winners of individual SPACs can be very difficult, however the ETF structure allows investors to access the most liquid SPAC IPOs in a diversified basket,” Defiance ETF said in a statement. “SPAK allows both financial advisors and retail investors to participate in an IPO private equity style of investing, which until now, was only available to large financial institutions.”
