What does this mean for the retail investor or shorter-term trader? It means that if the SPAC you are interested in does not have the red flags that would discourage taking a position (e.g. “abcExampleSPAC IV” has never had success yet is on number 6…) Then this is handled like any other trade that thrives on event driven cycles. There are obvious indicators that should not be ignored just as they should not be with other investment strategies. The assumption that the retail investor knows this will be made through the rest of the article.
So, the common share versus the warrant is a conversation often had between individuals that are less experienced with the warrant transactions. Many of the recent authors you have read depict the SPAC bonanza we currently find ourselves in as a “hand over fist collection of money from the coffers” that you almost can’t be wrong. In at least a portion of that analysis they are not incorrect, but there are very few similarities other than the underlying security. If you need specific examples, they are found throughout CommonStockWarrants.com and for the purpose of this writing I will use one as an example for the sake of brevity. Sufficed to say it is rarely the decision to invest in the company that is incorrect but rather the method by which an investor can leverage both their capital and returns in a more substantive way.
** In FULL DISCLOSURE I owned the warrants (PIC.WS) during this cycle and have since exited **
Pivotal Investment Corp II
Pivotal Investment Corporation II operates as a blank check company. The Company formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization, and similar business combination with one and more businesses or entities.
The example provided below covers the period entered September 04, 2020