May 21, 2020 – SPAC arbitrage, or generating yield from investing in Special Purpose Acquisition Companies, is a core strategy of the Accelerate Arbitrage Fund (TSX:ARB).
I wrote an in-depth primer on the mechanics of SPAC arbitrage earlier this month in a piece titled, “The Art Of SPAC Arbitrage.”
SPAC is an acronym for special purpose acquisition company. Also known as a “blank-check company,” a SPAC is a cash-rich shell company that raises money from investors in an initial public offering and seeks to acquire a private acquisition target over a fixed time period. Simply stated, it serves as a vehicle to bring a private company to the public markets.
SPACs have emerged in recent years as a viable alternative to the traditional initial public offering as a way for a private company to complete a going-public transaction. Its emergence as an asset class has been made apparent by its rapid growth over the past few years.
Blank-check companies have become one of the most active asset classes in 2020. In April, they accounted for 80% of assets raised by U.S. IPOs. As the coronavirus pandemic has slowed capital formation throughout a myriad of markets, including high yield bond and equity issuance, the issuance of SPAC IPOs has accelerated to record levels.
Currently, there are 103 SPACs outstanding, with 13 issued over the past month. The asset class now accounts for more than $29 billion in market value. The average SPAC arbitrage yield stands at 2.6%.
The Accelerate AlphaRank SPAC Monitor details various metrics on the current opportunity set while offering details on every individual SPAC currently outstanding. The Accelerate AlphaRank SPAC Effective Yield tracks the average arbitrage yield offered in the market. The Accelerate AlphaRank SPAC Index tracks the price return of the SPAC universe.
* AlphaRank is exclusively produced by Accelerate Financial Technologies Inc. (“Accelerate”). Visit AccelerateShares.com for more information.