Investing in a special purpose acquisition company (SPAC) is not for the risk-averse investor. A SPAC is a shell company that helps to bring a private company public, typically via a reverse merger.
This is what makes investing in a SPAC tricky. On the one hand, you’re investing in the management team of the acquiring company. That’s why one of the common refrains you’ll hear with SPAC investing is to “bet on the jockey.”
On the other hand, you’re really investing on the prospects of the company that is being brought public. DraftKings (NASDAQ:DKNG) is an example of a company that went public via a SPAC that has rewarded shareholders.
DraftKings isn’t the only example, but the reality is that many companies that go public by way of a SPAC don’t work out the way investors expect. In 2020, several companies that were affiliated with electric vehciles (EVs) went public. However, as it became clear that the EV market was not going to explode as quickly as forecast, many of these stocks have disappointed to date.
Nevertheless, there’s no such thing as a sure thing. But there are some current SPAC offerings that appear to have a bright future. Here are three picks that should be on your watch list.
PIoneer Merger Corp. (PACX)
The first SPAC on this list is Pioneer Merger Corp. (NASDAQ:PACX) which is bringing the savings and investing app Acorn public. Financial technology (fintech) is one of the hottest sectors in the market. JPMorgan Chase (NYSE:JPM) CEO Jamie Dimon recently acknowledged that fintech is disrupting the traditional banking system.
Acorn’s signature product is a mobile app for savings and investing. The company’s signature offering lets customers automatically invest the spare change from their debit or credit card purchases directly into index funds. However in recent years, it has expanded its services to include traditional banking products, a debit card and even an automated retirement account service.
The deal is valued at approximately $2.2 billion and is expected to close in the second half of 2021. Acorn will trade on the NASDAQ exchanged under the ticker symbol OAKS.
Kensington Capital Acquisition Corp (KCAC.N)
The next SPAC on our list is Kensington Capital Acquisition Corp. (NYSE:KCAC). Kensington is known for bringing many companies public (hence the .N in the above ticker). This time around the company is eyeing Wallbox, the Spanish electric vehicle charger maker.
This is an interesting SPAC because it is “competing” in a sense with another SPAC, TPG Pace Beneficial Finance Corp. (NYSE:TPGY), that is bringing public EVBox, the largest EV charging company in Europe. Wallbox could be the first European company to go public in the EV charging space.
This is not an area without risk. In the United States, ChargePoint (NYSE:CHPT) stock has so far failed to live up to its hype. Nevertheless, electric vehicles are already more widely available and accepted in Europe and a larger infrastructure will still be needed for widespread adoption.
DPCM Capital Inc. (XPOA)
The last SPAC on our list is DPCM Capital Inc. (NYSE:XPOA). This company is bringing Jam City, the mobile game developer public. As part of the merger, Jam City is acquiring Ludia Inc., a game publisher based in Montreal. Ludia makes games based on the “Jurassic World” movie franchise.
The optimism surrounding the deal can be summed up in one word, Roblox (NYSE:RBLX). Since going public via a direct listing in March 2021, RBLX stock has surged lately.
Jam City has had a history of acquiring new companies as well as developing its own games in-house.t And the company has a multiyear gaming agreement in place with The Walt Disney Company (NYSE:DIS). The purpose of the SPAC is to generate the additional capital that it needs to fuel even greater growth. For example, the company is projecting $1 billion in booking revenue after the merger is finalized. That compares to the $471 million the company recorded in 2019.
Before you consider Pioneer Merger, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Pioneer Merger wasn't on the list.
While Pioneer Merger currently has a "N/A" rating among analysts, top-rated analysts believe these five stocks are better buys.
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