SPACs give emerging companies both flexibility and control, while investors finally have open access to some of the biggest investment deals in the market. Expanding on this concept, Defiance ETFs has announced the launch of the first SPAC ETF, the Defiance Next Gen SPAC Derived ETF (SPAK), which is now available for trading. SPAK tracks the Indxx SPAC & NextGen IPO Index.
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. SPAK joins Defiance’s growing suite of first-mover thematic ETFs, including (FIVG ) (5G ETF) and (IBBJ ) (Junior Biotech ETF).
“The Defiance team is excited to bring to market the first SPAC ETF (NYSE: SPAK). 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 until now, was only available to large financial institutions,” a statement issued by Defiance ETFs earlier this morning.
Regarding the index, 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 Acquisitions Corporations (“SPACs”), ex-warrants, and initial public offerings (“IPOs”) derived from Special Purpose Acquisitions Corporations.
Why Invest in SPACS?
Elaborating more on why investors can look to SPACS, the IPO process is institutionalized, cumbersome, and inflexible, especially in adapting to the Covid-19 reality where virtual roadshows are less effective, and uncertainty is rife. With SPAC, there’s 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 grow, 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.
Delving deeper into the 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 29 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.
SPAK is distributed by Foreside Fund Services, LLC. For more information, visit https://www.defianceetfs.com/
This article originally appeared on ETFTrends.com.