SPAK // Defiance NextGen SPAC Derived ETF
What are SPACs?
- SPACs are companies with no commercial operations that are established solely to raise capital from investors for the purpose of acquiring one or more operating businesses.
Why invest in SPACS?
- SPACs give emerging companies both flexibility and control, while investors finally have open access to some of the biggest investment deals in the market.
- The IPO process is institutionalized, cumbersome and inflexible, especially in adapting to the Covid-19 reality where virtual road shows are less effective, and uncertainty is rife. Enter the Special Purchase Acquisition Company (SPAC), an alternative route for a company to go public, which can be cheaper, quicker, more transparent and involves agreements and processes more within the purview and control of the company.
- SPACs have grown in popularity as they increasingly attract high-worth, credible sponsors. As the quality of their founders and the success of their merger companies grows, so does their integrity in the wider investment community. So far in 2020, SPACs have raised $22.5 billion to spend on deals, exceeding the record $13.6 billion raised in 2019.1
Why the Defiance SPAK ETF?
- 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. SPAK allows both financial advisors and retail investors to participate in an IPO private equity style of investing which is usually only available to large financial institutions. The ETF currently has 36 holdings, rebalanced on a quarterly basis. An 80% weighting is applied to IPO companies derived from SPACs and 20% is allocated to common stock of newly listed Special Purpose Acquisition Companies (“SPACs”), ex-warrants. Newly IPO companies derived from SPACs will be screened monthly and SPACs quarterly.
- The Indxx SPAC & NextGen IPO Index is a passive rules-based index that tracks the performance of the common stock of newly listed Special Purpose Acquisition Companies (“SPACs”), ex-warrants, and initial public offerings (“IPOs”) derived from Acquisition Companies over the preceding 36 months. SPACs are companies with no commercial operations that are established solely to raise capital from investors for the purpose of acquiring one or more operating businesses.
1 “Wall Street holds the cards as Main Street chases blank-check deal frenzy,” Joshua Franklin, Krystal Hu, August 18, 2020. https://www.reuters.com/article/us-usa-spac-wallstreet-analysis-idUSKCN25E166
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