Macro Dragon: +440% SPAC Capital - Part I

Macro Dragon: +440% SPAC Capital - Part I

8 minutes to read
Kay Van-Petersen

Global Macro Strategist

Summary:  Macro Dragon = Cross-Asset Daily Views that could cover anything from tactical positioning, to long-term thematic investments, key events & inflection points in the markets, all with the objective of consistent wealth creation overtime.


(These are solely the views & opinions of KVP, & do not constitute any trade or investment recommendations. By the time you synthesize this, things may have changed.)

Macro Dragon: +440% SPAC Capital - Part I

SPAC 101

  • So what are SPACs? How do they work?

  • SPAC = Special Purpose Acquisition Vehicle

  • At their core, they are basically blank cheque companies that have been created with a specific mandate (investment thesis/theme) in mind to invest their shareholders money.

  • So for instance, lets say we put together the Dragon Squad of 4 individuals with a background in, Hospitality, Tourism & Leisure Travel – where they feel a lot of that industry has been decimated due to Covid-19, global shutdown etc.

  • These four horsewomen & men assemble a SPAC with a mandate to invest in that space. They raise $100m, from investors who like & want pure exposure to the investment thesis (SPAC’s mandate), in a company which then gets listed. They have a certain amount of time in which to make an acquisition in their space, after which if they are not successful, the capital gets returned to investors.

  • The pros of the SPAC pathway are the speed of which they can be done, 4-12m… as say opposed to an IPO pathway that can easily take 2-3yrs. So a lot of time is saved & as regular readers of the Dragon know, this is the biggest misallocation of resources & resourcefulness, its time. Generally speaking, we can get everything back… yet not time.

  • They are super flexible, because one is not tied up with the baggage that would come with a company – be it controlling shareholders of different views, constraints on strategy, balance sheet, leverage, cashflows, etc.

  • They are obviously leveraged for the principals, as well as amplified focus for investors – i.e. instead of say buying company X that has a 10% exposure to the Emerging Market Healthcare Equipment & Systems space, they can get 100% exposure to that theme.

  • Overall we have had a structural decline in companies going public, so SPACs always have the scarcity factor of bringing private companies public on their side which can sometimes result in very favorable demand/supply factors – especially or areas that have been very much in demand such as anything to do with Space or SaaS.

  • Generally from an investors perspective, they gain liquidity (can redeem their shares if they got into the SPAC before it listed) & can treat it as a free call option – i.e. some SPACs rise in value before even an asset has been a targeted, let alone successfully completed. The majority of the capital raises c. 85-99% sits in an escrow account, whose opportunity cost is exceptionally low given the level of real yields globally being negative.

  • In Part II of our SPAC Capital series we will touch on some of the bigger listed names – like IPOC, PSTHU, SPCE, DKNG, CCIV, STPK – the performance of SPACs overall, as well as the potential risks & opportunities around them.

  • From a Global Macro viewpoint, KVP believes we are in a regime of massive asset class inflation that is likely to last multiple years if not 5-10yrs – so whilst we may see some natural cooling off in the SPAC space... the combination of the backdrop regime, overall asset inflation & structurally lower supply of public companies likely means this is a vehicle that is here to stay.

Dragon Interviews…

 -


Start-to-End = Gratitude + Integrity + Vision + Tenacity | Process > Outcome | Sizing > Position.

This is the way 

KVP

Quarterly Outlook

01 /

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)


Business Hills Park – Building 4,
4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

Contact Saxo

Select region

UAE
UAE

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.