Short SPACs With This ETF

·3 min read

The year 2020 witnessed several trend reversals due to the pandemic. Along with changes in work culture and lifestyle, there was a notable shift in the investment world. For example, in the IPO and M&A field, we saw the rise of Black Check or Special Purchase Acquisition Company (SPAC). Notably, the Blank Check route for going public is less complicated and pricey.

Big shot investors like Bill Ackman and Michael Klein raised billions through their SPACs in 2020. About 45% of U.S. corporate executives had shown interest in pursuing SPACs in late 2020, according to Deloitte, as quoted in an article.

Year to date, there have been 316 SPAC IPOs with gross proceeds of nearly $102 billion. That is equivalent to 248 SPAC IPOs in 2020, representing $83.3 billion in gross proceeds, as quoted on the Tuttle Capital Management press release.

Given the resurgence in blank check companies, several SPAC ETFs have been launched in the recent past.  However, the winning spree has faltered this year. Apart from the regulatory body’s apprehensions, SPACs have tumbled this year on rising rate concerns. As a result, people are now interested in shorting SPACs too.

Inverse SPAC ETF in the Cards

This calls for the need of an inverse SPAC ETF, which Tuttle Tactical Management brought in. The issuer recently launched the Short De-SPAC ETF (SOGU). The Short De-SPAC ETF SOGU looks to provide an inverse (-1x the) return of the De-SPAC Index for a single day. It offers investors of all sizes convenient “one-ticker” access to an institutional-level short vehicle that may otherwise be difficult to execute.

Notably, the issuer also launched a regular product on the same concept — the De-SPAC ETF (DSPC). The De-SPAC ETF DSPC looks to track the performance of the De-SPAC Index, an equally weighted portfolio of 25 of the largest de-SPACs on a rolling 12-month basis. The index is rebalanced monthly.

Can the Short Fund See Success, If Approved?

The fundamentals behind inverse SPAC ETF look good. “Post-merger companies are particularly attractive to short because they have larger market capitalizations, making their shares easier to borrow, and because early investors in the SPACs are eager to sell shares to lock in profits, analysts and fund managers said,” according to Wall Street Journal, as quoted on ETF Trends.

The above logic indicates that the inverse SPAC ETF should find enough interest from investors if it hits the market. The fund should also see success (if approved) as there is not much competition.

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