SPACs = Scams

Warning to all of my friends out there who may be interested in investing in the hot new investment category called SPACs. These are scams against the people who invest in them. Basically, here is how it ends up working:

  1. Famous random person raises big money from investors in order to buy out an as yet unknown company.
  2. Famous person finds a company to buy
  3. Famous person pockets ~20% of the investors money, then gives them ~80% of the company

Keep in mind that the famous person running this has ZERO special knowledge that will help… the CEO of the company they are acquiring is the one who has all the critical knowledge.

SPAC’s are ENORMOUSLY lucrative for all involved… EXCEPT for the investor who pays for everyone else to get rich.

Takeaway from the madhedgefundtrader article – “The performance of SPACs so far has been dismal. There have been 315 SPACs created since 2015. Only 93 managed to invest their funds in a target company and only 29 of those have produced a profit. This was during one of the greatest runaway bull markets of all time.

Only companies that are complete crap go along with being acquired in this manner… see Nikola.

 

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Joel Gross

Joel Gross is the CEO of Coalition Technologies.

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