"In a SPAC process, investors have more information than they do in a regular IPO"
"Listing a SPAC is easy. Finding a good target and creating value for shareholders and having that stock perform for multiple years, is what’s difficult," noted Ben Canet, Foreign Investment Manager at Phoenix Investment
"During a traditional IPO process, only the best paying institutional investors have access to the projections because the projections are only given by research analysts of the banks that are doing the IPO. Retail investors never see those projections. In a case of a SPAC they have more information," said Ben Canet, Foreign Investment Manager, Head of Global Private Credit & Co-Leading SPAC Investment Effort, Phoenix Investment, during the Calcalist and UBS conference dedicated to the recent surge in special purpose acquisition companies mergers.
Canet noted that he doesn't believe SPACs are a riskier investment for retail investors compared to traditional IPOs. "Retail investors will be disappointed by many of the SPACs they invest in the same way they are disappointed in many other companies they invest in. I don't think this is different. At least in a SPAC process, in my opinion, they see more information," said Canet. "In a case of a SPAC they have more information. Can the information be wrong or exaggerated? Can retail investors make mistakes? Absolutely, but we will see how this plays out over the next few years."
Canet also spoke of the surge in the SPAC market over recent years and what to look out for when investing in such a company.
"When I started investing in SPACs five or six years ago, I was working for a hedge fund in New York and my portfolio was between $500 and $800 million. At that time, the sponsors weren't as high quality as they are today. You had small teams of people who had basically retired from public firms. It was very hard at the time to convince high-quality private equity firms to start SPACs. It was a big change from 2015 to 2019," said Canet. "Listing a SPAC is easy. Finding a good target and creating value for shareholders and having that stock perform for multiple years, is what’s difficult. Having a celebrity or a good network is great for the IPO, but to find a good deal and execute a good deal and to help the target company become a successful public company, that requires experience and real skills. It is fine to have a celebrity involved as it can open doors, but you always need to be careful that there is someone very professional and very experienced who can deliver the hard work."