October 30, 2021 - mediadealer - Money Hacks - 1,162 views
Date: 2021-10-25 20:59:43
Lets talk about the new DWAC SPAC Merger, whether or not this should be considered as an investment, and my thoughts on the company going forward – Enjoy! Add me on Instagram: GPStephan – DOWNLOAD MY NEW FINANCIAL APP:
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SPACS EXPLAINED:
Traditionally, when an established, privatized company wants to raise money – or, cash out – they’ll perform what’s called an “IPO,” which stands for an Initial Public Offering. This is when they partner with an investment bank, release financial records, price their shares in-line with market value…and then, start trading on WallStreet for everyone to speculate with in the first week.
But, in this case…since, a fully formed company doesn’t yet exist…they’re not able to IPO…and, instead, they use what’s called a “SPECIAL PURPOSE ACQUISITION COMPANY,” otherwise known as a SPAC.
These are companies formed for the sole purpose of RAISING MONEY to acquire OTHER companies…and, in theory…investors are buying in because, they believe the management team has the potential to blindly turn their investment into a mini-fortune.
But, unfortunately – there isn’t the best history of SPAC performance:
When YCharts analyzed the performance of SPACs in relation to the overall market…it was found that the vast majority of them FAILED to outperform the SP500 since 2009.
Even though, short term – SPAC interest can see some pretty monumental returns after an announcement…as momentum settles down, so does their price. In fact, it was found “that over 100 SPACS, who announced mergers this year….have, on average, gained under 2% from the price they traded at, when they first listed on the stock exchange.”
Statistically…when you look at this OBJECTIVELY…it does not have the components of previously successful SPAC IPOs, in terms of an established company as a sound financial investment…but, it does have something that MANY of them DON’T – and that’s PLENTY of free marketing.
Everything is fueled by hype…excitement…and the euphoria of seeing this continue to increase in price, whether or not it’s actually sustainable…so, long term…I just can’t see how these valuations would be sustained without being constantly mentioned in the media, over and over and over again…which, I suppose is absolutely possible…OR, them actually executing on the project without anything going wrong.
Overall, I would treat this stock as you would any other social media momentum investment…don’t invest more than you could lose, don’t get greedy, and take profits if you’re up a life changing amount of money.
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