Special purpose acquisition companies, or SPACs, have surged in popularity over the past year or so, but these blank-check companies still aren't well understood by many investors. In this Fool Live video clip, recorded on March 15, Fool.com contributor Matt Frankel, CFP, gives a quick overview in how investors can invest in SPACs that have announced their acquisition targets but haven't yet finalized their deals.
10 stocks we like better than Walmart
When investing geniuses David and Tom Gardner have an investing tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now… and Walmart wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Stock Advisor returns as of 2/1/20
Matt Frankel: How to invest in a SPAC. Basically, if a SPAC has not announced its deal or has just recently announced its deal, you will have a few options on how to buy it. You can buy either the SPAC's units, which are how a SPAC first goes public. The dead giveaway there is the ticker symbol will end in "U." Those consist of one common share of stock and a little piece of a SPAC warrant, which is essentially an option to buy another share at a later time. There are three different ways you can invest in a SPAC at first. The unit, the shares, or the warrant. All the ticker symbols we give you today, I believe, that's at least my intention, will be the shares. Warrants are kind of complex. We're going to go through 14 companies. We really don't have time to explain how the warrants on each one of them work. At least I wasn't planning on doing that. I see that the other two are not either. Basically, when we give you these ticker symbols, that's what you would buy if you were going to invest. In the companies that have already announced their acquisition target, for example, one of them is a SPAC called TS Innovation Acquisition, ticker symbol is TSIA. They are acquiring a company called Latch, which the ticker symbol once the merger is complete, will be LTCH. You don't need to wait until the merger is complete. You can buy the SPAC and at the time of the merger's finalization, the ticker symbol and the shares in your account will be converted automatically. It's worth mentioning that you don't need to wait until the ticker symbol's changing. You can invest in the units. That's almost the same investment, but it has a little piece of a warrant. Or you can just buy warrants, which are essentially like buying options. I wouldn't necessarily recommend those for people who don't really know what they're doing with them.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.